Economic Perspectives -

September’s GDP was still 8% lower than in February, and growth was weakening before the second lockdown

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


16th November 2020


Ruth Lea CBE


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

  • GDP growth slowed to 1.1% (MOM) in September, after a 2.2% (MOM) increase in August. Moreover, GDP was still 8.2% lower in September than in February, prior to the pandemic. This, coupled with the Markit survey for October, suggested that growth was weakening significantly before the imposition of the second lockdown (implemented on 5 November, in England).
  • GDP rose 15.5% (QOQ) in 2020Q3, after the 19.8% decline in 2020Q2. GDP was still some 9.7% down on 2019Q4; this was more than twice as large as the cumulative drop in GDP observed in Italy, Germany and France and nearly three times the size of the cumulative drop of 3.5% in the US.
  • The trade balance (goods and services) remained in surplus in 2020Q3. However, the underlying total surplus (excluding precious metals) in real terms marginally narrowed to £7.4bn in 2020Q3, from £8.2bn in 2020Q2.
  • The labour market is weakening. Unemployment and redundancies rose quite sharply in the three months to September, whilst employment fell. The 16-24 age group has seen the biggest falls in employment.
  • After the collapse of vacancies, hours worked and earnings growth at the height of first lockdown there have been further signs of improvement. But they remain significantly below the levels seen before the impact of the coronavirus pandemic.

Regional GDP:

  • The ONS has released regional GDP for 2020Q1. UK GDP fell 2.5% (QOQ) in 2020Q1, with all four countries showing negative growth: Northern Ireland (-4.5%), England (-2.5%), Scotland (-2.5%) and Wales (-2.4%). Of the nine English regions, the largest negative growth was the East Midlands (-4.1%), while the smallest declines were in the East of England and London (both at -1.5%).
  • By way of background, the UK countries/regions vary considerably in their contributions to GDP. London and the South East of England were the largest regional economies by a significant margin, comprising together over 37% of UK GDP, in 2018. They are followed by the North West (9.7%), East of England (8.7%), Scotland (7.5%), West Midlands (7.5%), South West (7.4%), Yorkshire and Humberside (6.6%), East Midlands (5.8%), Wales (3.5%), North East (2.9%) and Northern Ireland (2.3%). England comprised nearly 86% of UK GDP in 2018. 
  • London, the South East and the East of England all had net fiscal surpluses FY2018, whilst all the other regions and the countries of the UK had net fiscal deficits.

Brexit update:

  • UK-EU talks on the future UK-EU relationship continued last week with, apparently, little progress made. The “mid-November” deadline for a “deal” was, therefore, missed.
  • Talks will continue week commencing 16 November, but there are few expectations that a deal will be settled by 19 November (another “deadline”) when the European Council will have a video conference.
  • It has been reported that the European Parliament has told EU Chief Negotiator Michel Barnier that the latest date they could receive a negotiated, translated deal was 10 December, the first day of the next EU summit (the next meeting of the European Council, 10-11 December), in order to agree it by the end of 2020. The deal has to be agreed by both the Council of the European Union and the Parliament before the end of the transition period (31 December 2020), otherwise the UK will trade with the EU under WTO rules from 1 January 2021.

Ruth Lea said “The September growth data were disappointing, and the October growth data are likely to be even more disappointing. Given the imposition of the second lockdown in November it is widely expected GDP will fall in 2020Q4, thus reversing the recovery from the first lockdown. The Bank has suggested a fall of 2%. Unsurprisingly, there have been reports that the Chancellor is preparing to take further emergency action to support consumer spending and, hence, the economy.”




Economic Perspectives

Would you like to receive Arbuthnot Latham’s fortnightly Economic Perspectives from Ruth Lea CBE directly to your email inbox? Click the button to subscribe to our email newsletters.

Subscribe to our newsletters

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.

Tel: 020 8346 3482
Mobile: 07800 608 674