UK GDP grew by record 16% in third quarter but still recovering from crash

Britain’s economic recovery from its coronavirus crash was quicker than expected in the third quarter, according to official data, which again showed government borrowing soaring to pay for the coronavirus crisis.

Gross domestic product grew by a record 16.0% from July to September, revised up from a previous estimate of 15.5%.

But that still did not make up for its 18.8% slump in the second quarter, when much of the economy was shut down.

Britain’s economy was hit harder than most others by the pandemic, which has led the deaths of more people than any other country in Europe after Italy.

The country’s initial coronavirus lockdown lasted for longer than most others and now London and nearby areas are back under tough restrictions as the government tries to slow the spread of a new variant of the virus that spreads more easily.

The economy almost ground to a halt in October, according to previously published figures, and the Bank of England thinks GDP will shrink again in the fourth quarter as worries about the Dec. 31 deadline for a Brexit trade deal with the European Union compound the damage from COVID-19.

Tuesday’s data showed the economy was 8.6% below where it was at the end of 2019, less than an initial estimate of 9.7%.

It also showed household incomes grew over the summer as many workers returned from temporary layoffs.

Consumer spending rose by almost 20% in the third quarter as households ran down some of the savings that piled up in the second quarter, when people were ordered to stay at home and many non-essential retailers and others businesses were closed.

The savings ratio fell to 16.9% from a record 27.4% in the second quarter.

The Office for National Statistics also said Britain borrowed a record 241 billion pounds ($323 billion) in the first eight months of the financial year, nearly 190 billion pounds more than in the same period a year earlier.

The country’s budget forecasters think the deficit will hit almost 400 billion pounds in the 2020/21 year, close to 20% of GDP, or double the hit from the global financial crisis.

Public debt stood at almost 2.1 trillion pounds or 99.5% of GDP, the highest ratio since 1962.

Finance minister Rishi Sunak reiterated his pledge to tackle the huge shortfall, but not immediately.

“When our economy recovers, it’s right that we take the necessary steps to put the public finances on a more sustainable footing so we are able to respond to future crises in the way we have done this year,” he said in a statement.

The International Monetary Fund has said Britain will probably need to raise taxes after the pandemic to fill the gap.

The ONS also said on Tuesday that Britain’s current account deficit - typically one of the economy’s weak spots - widened to 15.7 billion pounds, or 2.9% of GDP.

($1 = 0.7462 pounds)