UK economic recovery slowed to 2.1% in August – as it happened
Rolling coverage of the latest economic and financial news after UK growth figures were released for August
- UK economic growth slows in August despite eat out to help out'
- Coronavirus - latest updates
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3.26pm BST
3.13pm BST
Follow our UK coronavirus live blog for further analysis and reaction to the Chancellor's expanded furlough scheme:
3.05pm BST
The government will cover two-thirds of workers' wages at businesses forced to close during new coronavirus lockdowns, the chancellor has announced.
Coming as ministers scramble to contain the economic fallout from tough new lockdown measures planned for the north of England, Rishi Sunak said the government would subsidise pay by providing grants to companies forced to close their doors - likely to be led by pubs, bars and restaurants - due to fresh controls being put in place.
Related: Rishi Sunak expands wage subsidies to head off winter surge in job losses
3.00pm BST
The UK government will cover two thirds of employees' salaries if businesses are forced to shut down due to local or national coronavirus restrictions over the next six months, the Treasury has confirmed.
That will mean the government will pay 67% of worker salaries, up to a maximum of 2,100 a month. Employers will not have to contribute towards wages and will only asked to cover national insurance and pension contributions.
Throughout the crisis the driving force of our economic policy has not changed.
I have always said that we will do whatever is necessary to protect jobs and livelihoods as the situation evolves.
2.32pm BST
Wall Street is open for trading and stocks are climbing. Here's how the major indices are looking:
2.14pm BST
Shares for aircraft engine maker Rolls Royce are on track for their strongest weekly rise since the company listed in 1987.
Rolls shares were up as much as 17% this morning, having doubled in the past week to trade as high as 228.9p each. While it's a fraction of the pre-Covid share price of 690p, it's a significant surge for the engineering giant's stock.
1.51pm BST
We're less than an hour away from the US market open and futures are pointing to a positive start on Wall Street as investors hold out hope for another Covid stimulus package:
The prospect of some form of stimulus in the US is trumping the health crisis, even though a political settlement is far from agreed upon.
Things are still up in the air when it comes to the relief package in the US, as President Trump is keen for smaller individual relief schemes, while Nancy Pelosi, the House Speaker, is driving for a large all-or-nothing package.
1.28pm BST
London-listed security giant G4S has confirmed that US-based Allied Universal Security Services has expressed interest in a potential takeover.
It would mean launching a rival bid for the firm, which has been the target of a hostile takeover attempt by Canadian firm GardaWorld.
12.54pm BST
Here is our full story on the Edinburgh Woollen Mill Group administration:
Edinburgh Woollen Mill Group, the owner of Jaeger, Peacocks and Austin Reed, is teetering on the brink of administration putting up to 24,000 jobs at risk, my colleague Sarah Butler writes.
Related: Up to 24,000 jobs at risk as Jaeger and Austin Reed owner files for administration
12.49pm BST
Fresh forecasts released by NIESR (the National Institute of Economic and Social Research) are slightly less pessimistic than Berenberg, but still point to an -8.5% fall in GDP for the whole of 2020.
It expects growth to come to a complete halt in September, logging a 0% monthly rise in GDP. That would mean a 15% rise for GDP in Q3.
These numbers would suggest that the UK could grow by about 15% in the third quarter of 2020. However, there is further cause for concern ahead with the likely re-imposition of #lockdown measures, the winding down of government support measures, and #Brexit uncertainty
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12.12pm BST
Edinburgh Woollen Mill, the owner of Jaeger, Peacocks and Austin Reed, is teetering on the brink of administration putting up to 24,000 of jobs at risk.
The group, controlled by entrepreneur Philip Day, has filed a notice of intention to appoint administrators, a legal document which provides protection from creditors for ten days.
12.00pm BST
Reflecting on today's GDP figures, the Construction Products Association (CPA) has warned that industry growth will likely slow further without additional government support.
(Reminder: construction was one of the strongest sector August, recording a 3% rise in output, even though it was significantly lower than the 17.2% growth logged in July)
Interestingly, almost one-third (31%) of commercial construction is in London alone where construction work involves many trades in tight spaces, so social distancing and other safety measures are still hindering productivity on site. As a result of this, commercial towers in London that pre-Covid-19 were anticipated to finish in the Summer are now likely to finish in 2020 Q4 or 2021 Q1. Along with this hindrance to productivity, there remains the question of where demand and contracts for new offices, retail and leisure will come from given increased working from home and the risky, high upfront nature of investment required for commercial builds, which has a long-term rate of return.
Overall, total construction output continues grow but it is increasingly becoming reliant on government either directly through spending in infrastructure or indirectly through policy stimulus to boost housing.
This places an extra responsibility on government to ensure it comes through with activity on the ground and not just announcements if we are to see construction recovery to continue and not stall in the next 12 months.
11.26am BST
The London Stock Exchange Group has agreed to sell the Milan stock exchange to the rival group Euronext for 4.3bn (3.9bn) in cash, clearing the way for the LSE's purchase of the financial data provider Refinitiv.
The LSE and Euronext, which owns several European stock exchanges including the Paris bourse, began exclusive talks over the Borsa Italiana deal in September.
Related: London Stock Exchange to sell Milan arm to Euronext for 4.3bn
11.14am BST
The weaker pound is helping prop up the FTSE 100, which is now trading higher by around 0.7%.
The blue chip index is now above the 6000-point mark for the first time since mid-September at 6019.
Rolls Royce shares are driving higher again and the stock is up 16% this morning, so from the lows of last Friday, it is up 116%.
There is increasing speculation about a takeover bid but there is nothing official to back that up. A huge move in one week without any obvious news behind it seems odd.
10.44am BST
Back to Brexit, UK City regulators have penned letters to banking CEOs warning them that there could be market instability if firms don't properly prepare for the end of the Brexit transition period on 31 December.
In the letter, the FCA and PRA warn:
Financial stability is not the same as market stability and some market volatility and disruption to financial services, particularly to EU-based clients, could arise.
Financial institutions are continuing to make preparations and engage with clients and customers to minimise any disruption and it is important that they continue to do so.
10.16am BST
The August growth figures for the UK were a shock, and not in a good way.
All the ingredients seemed to be in place for another month of rapid recovery from the spring slump induced by lockdown. The number of Covid-19 cases was low, no new restrictions were put in place and the public seemed eager to spend the savings accumulated earlier in the year.
Related: Growth data points to catastrophe in making for UK economy
10.06am BST
Berenberg Economics has revised down their UK GDP forecasts for 2020 from -9.9% to -10.1%, following the release of the August data and the lockdown looming for northern England.
The research team, led by chief economist Holger Schmieding, explains:
Reacting to the sharp increase in the number of SARS-COV 2 infections, national and local governments across the UK are once again tightening restrictions on daily life. The rules range from limiting the number of people in a group and a 10pm curfew for pubs and restaurants across England, to the temporary closure of such places across the central belt of Scotland. Further restrictions in parts of northern England look likely in the days to come.
Amid mounting restrictions, and in line with our latest revisions to the Eurozone outlook, we downgrade our Q4 call to 2.0% qoq from 2.5% previously.
9.45am BST
Sterling seems relatively unfazed by the UK GDP data, with investors appearing more concerned about the outcome of Brexit talks over the coming weeks.
Dean Turner, economist at UBS Global Wealth Management said:
When it comes to the outlook for sterling, we think that the progress on Brexit negotiations is likely to have a bigger impact on the currency in the near term. We continue to expect a deal, albeit late in the day, and expect the pound to trade a little higher against the euro and dollar following the end of transition period."
9.16am BST
Sounds like hopes for a V-shaped recovery are fading after August's GDP reading.
George Brown, an economist at Investec says that the transitory boost" from an easing of Covid restrictions in the UK have now largely faded, and that the recovery looks increasingly fragile as coronavirus cases continue to rise.
One thing that does seem clear is that the economic recovery will no longer be firmly V-shaped", as a number of commentators have claimed. A further clampdown risks sending GDP into reverse, creating a wave or ripple more characteristic of a Viennetta than a letter.
The only question is: can Mr Sunak make things better?
9.05am BST
Outside of the services sector, ONS figures show industrial production rose a mere 0.3% month-on-month in August compared to 5.2% in July.
Meanwhile, manufacturing increased 0.7% versus 6.9% a month earlier.
8.43am BST
Britain's economic recovery from the coronavirus pandemic slowed in August despite the government's eat out to help out scheme fuelling a rise in consumer spending.
The Office for National Statistics (ONS) said gross domestic product rose by 2.1% in August compared with the previous month, falling short of expectations among City economists for a monthly growth rate of 4.6%.
Related: UK economic growth slows in August despite 'eat out to help out'
8.36am BST
The UK's dominant services sector experienced weaker growth in August, having grown just 2.4% in August compared to 5.9% in July.
Services growth is still 9.6% lower than the level in February 2020, before Covid hit the UK.
8.27am BST
For a better sense of the UK's economic recovery from Covid, here is a chart showing how far we've come since April's plunge:
8.06am BST
Our economics correspondent Richard Partington says the government is revving up for a job support announcement today. Stay tuned.
Update to government's economic support is coming - Treasury says: "The chancellor will be setting out the next stage of the Job Support scheme later today that will protect jobs and provide a safety net for those businesses that may have to close in the coming weeks and months"
8.04am BST
European markets are open and most indices are managing to trade in positive territory:
7.52am BST
UK chancellor Rishi Sunak has reacted to the GDP data, saying:
Today's figures show our economy has grown for 4 consecutive months, but I know that many people are worried about the coming winter months.
Throughout this crisis, my single-focus has been jobs - protecting as many jobs as possible, and providing support for people to find other opportunities where this isn't possible. This goal remains unchanged.
7.43am BST
Digging further into the UK GDP data, the 2.1% rise in August marks the fourth consecutive monthly increase since GDP plunged by a record 19.5% in April.
UK GDP is now 21.7% higher than its April low.
7.31am BST
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
And importantly: happy UK GDP day. Though how happy you are about the pace of Britain's recovery depends on how you look at the numbers.
While the latest data confirms a rebound in economic activity continued into August, the sharp slowdown in growth indicates that the recovery may be running out of steam, with output still well below pre-crisis levels.
The increase in activity in August largely reflects a temporary boost from the from the economy reopening and government stimulus, including the Eat Out to Help Out Scheme, rather than proof of a sustained V'-shaped recovery.
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