UK Economy – there is growth, but it’s slow

0.8 percent GDP growth in May 2021 is the fourth consecutive month of growth. As restrictions eased in April there was a resurgence of economic activity, that hasn’t been matched in May. As it stands, UK GDP remains 3.1 percent lower than it was pre-pandemic in February 2019.

Similarly, production output grew by 0.8 percent in May 2021 which was broadly in line with the growth in service output of 0.9 percent for the month. Production output for May 2021 is 2.6 percent below output levels of February 2020 before the pandemic started to impact.

Manufacturing Production remains stable but weak

Manufacturing production output increased by just 0.8 percent in May 2021, which makes manufacturing output 0.3 percent below where it was in February 2020. The manufacturing community implemented COVID-19 safety measures during the first national lockdown in 2020, which means that operationally, the manufacturing sector has been able to continue to produce goods. However, demand issues, such as those we see in the aerospace sector linked to international travel restrictions and the more recent supply issues, like the current chip shortage being experienced by automotive are continuing to dampen growth of the wide industry.

The current global chip shortage is now impacting on UK production, most notably in the manufacturing of transport sector which declined by 16.5 percent, with automotive declining by 27 percent alone. Multiple plants reported pausing production owing to low supply of chips which are essential to the manufacture of automobiles. Automotive output is now 35.1 percent less than it was in May 2020, one year ago.

Five out of thirteen subsectors of manufacturing declined in May 2021. The list of manufacturing sectors that we usually compare aerospace to, including the manufacture of; Pharmaceuticals, automotive, food and drink have all grown beyond where they were one year ago in May 2020, which was peak pandemic outbreak and national lockdown.

Aerospace output remains subdued

Aerospace is the manufacturing sector that remains significantly weaker than in February 2020 and remains 39.2 percent smaller in terms of output, declining once again in the month of May 2021 this time by 0.7 percent.

The repair and service side of aerospace reportedly also shrank in May 2021, by just 1.1 percent, however, this means the combined sector output is now 44 percent smaller than it was in February 2020.   The chart shows the low and flat output for the sector, which may increase on its own as restrictions ease, or more likely require investment from government to kick start a recovery for manufacturing in line with easing restrictions and the ambition of net zero emissions.