Coronavirus: Hangover time as Eat Out scheme fails to keep ‘chunky’ economic recovery on track | Business News



Eat Out To Help Out was designed to lift spirits on both sides of the bar, an August freebie intended to boost hospitality businesses returning to trade after lockdown, and customers who had endured months at home.

If the chancellor was hoping it would also help keep economic recovery on track, however, he may be disappointed.

The August GDP estimate from the Office for National Statistics is a case of glass half empty, showing growth of just 2.1%, a marked slowdown on the 6.6% recorded in July and almost 9% in June.

The disappointment will be felt beyond the Treasury.

Economists had earmarked August as the last month that might deliver “chunky” growth comparable with the last three months, before autumn and the return of the outbreak took a further bite out of consumer confidence.

Instead, the levelling off of the recovery leaves the economy still a huge 9.2% smaller than it was in February, and the longed-for V-shaped recovery looking more optimistic than ever.

With expectations of growth of up to 5% in August, the hangover has kicked in fast.

Eat Out To Help Out did help deliver growth in restaurants and bars.

Taken together with accommodation, which benefited from people holidaying at home, whether they wanted to or not, the services sector grew 71%, and contributed more than half of the overall economic growth for the month.

Elsewhere the economy appeared to flatline, with only the construction, transport, education, health and other services managing growth of more than a single percentage point.

Other services rose just 2.4% month-on-month, with uncertainty over the future shape of the pandemic restraining consumption, and the boost delivered by the initial return to shops in mid-June having worn off.

Construction, helped by house building, bounced back 3% but manufacturing remains stricken with just 0.7% of growth, with car production stalled and aviation grounded.

These figures show the economy is still 9.2% smaller than it was in February, a yawning gap that is unlikely to be clawed back by the end of this year, and perhaps next.

Responding to the figures as he prepared to revive the furlough scheme for businesses caught in local lockdowns, Chancellor Rishi Sunak did not mention Eat Out To Help Out. He focused instead on “four consecutive months of recovery” and his familiar script about protecting jobs being a priority.

He has previously acknowledged that the UK economy is heavily reliant on consumer services, and these figures suggest that has never been more true.

That puts the economy in a perilous state.

Having spent the summer paying us to go out for dinner and urging us to go back to work, the government has now reversed the message and has highlighted hospitality as a primary cause of the second wave (despite disputed evidence).

With winter about to bite, consumers confused as well as wary, and “local” lockdowns about to close hospitality businesses across northern England as well as Scotland, services cannot be relied on to keep the economy moving over the coming months.

It may be that the most significant impact of Eat Out To Help Out was on infection rates rather than economic wellbeing. No-one will raise a glass to that.



Sky News