Economic Perspectives –

GDP rose 4.8% in 2021Q2, as lockdown restrictions were eased

The latest Perspective from Ruth Lea CBE, Economic Adviser to Arbuthnot Banking Group.


16th August 2021


Ruth Lea CBE


In this Perspective Ruth Lea, Economic Adviser to the Arbuthnot Banking Group, discusses the latest UK data:

  • GDP rose by 4.8% (QOQ) in 2021Q2 but was still 4.4% below pre-pandemic 2019Q4. 
  • By comparison, US GDP was 0.8% higher in 2021Q2 than 2019Q4, whilst French GDP was 3.3% lower, German 3.6% lower, Italian 3.8% lower and Spanish 6.8% lower.
  • GDP growth in 2021Q2 was driven by a 5.7% (QOQ) increase in services, whilst production rose 0.5% and construction grew by 3.3%.
  • On the expenditure side, household consumption rebounded by 7.3% (QOQ) in 2021Q2 and government consumption increased 6.1%. But gross fixed capital formation slipped 0.5% and the trade balance deteriorated.
  • GDP rose by 1.0% (MOM) in June, for the fifth consecutive month. Growth was driven by services, whilst production and construction both fell. Production output was hit by planned closures for maintenance in oil field production sites.
  • The trade deficit (goods and services, current prices) widened to £4.4bn in 2021Q2 (from £1.8bn in 2021Q1).
  • The trade deficit widened to £2.5bn in June (from £0.2bn in May). Exports of goods to the EU were flat (MOM) in June, but retained the levels seen in December 2020 prior to the end of transition period.

Other UK news:

  • July’s public sector net borrowing (PSNB) data will be released next week and are expected to continue showing a moderation in borrowing on a year-on-year comparison. June’s PSNB data were marked by a significant increase in debt interest payments reflecting their sensitivity to inflation.
  • Debt interest payments are also sensitive to changes in interest rates and, as the OBR explained in March, that sensitivity has been significantly increased by QE, which has considerably shortened the average maturity of the net debt of the public sector as a whole (including the Bank of England).
  • The Chancellor recently commissioned the OBR to prepare their next forecast for the economy and public finances for publication on 27 October 2021.  

Ruth Lea said “Growth in the second quarter was satisfactory, even though GDP was still 4.4% lower than in pre-pandemic 2019Q4. This was somewhat worse than in France, Germany, Italy, and especially in the US, where GDP is now above the pre-pandemic level. However, given reasonable growth in 2021Q3 and 20121Q4, the pre-pandemic level should be attained, if not exceeded, by the final quarter of this year. The relaxation on 16 August of the self-isolation requirements of those contacted by Test and Trace should alleviate the business problems caused by the “pingdemic” and, hence, help the economy.”





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Author -

Ruth Lea CBE

Ruth Lea CBE

Economic Adviser, Arbuthnot Banking Group

Ruth Lea CBE has been Arbuthnot Banking Group’s Economic Adviser since 2007 and was an Independent Non-Executive Director from 2005-2016.

Ruth co-founded Global Vision in 2007 and was Director until 2010, and was previously the Director of the Centre for Policy Studies (from 2004 to 2007), Head of the Policy Unit at the Institute of Directors (from 1995 to 2003) and Economics Editor at ITN (from 1994 to 1995).  Prior to ITN she was Chief UK Economist at Lehman Brothers, Chief Economist at Mitsubishi Bank, worked for 16 years in the Civil Service (the Treasury, the DTI, the Civil Service College and the Central Statistical Office) and was an economics lecturer at Thames Polytechnic (now the University of Greenwich).

She is the author of many papers and articles on economic issues and has been a Governor of the London School of Economics and Council Member of the University of London.

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