U.K. Economy Loses Steam With More Damage Yet to Come

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The U.K. recovery slowed sharply in October, setting the course for a turbulent end to the year.

The economy grew just 0.4% in the month, down from 1.1% in September, as new measures to control the pandemic kicked in, shuttering businesses in some areas and curbing household mixing in others.

While the reading was better than the stagnation predicted by economists, worse could be to come in November, when the whole of England was placed into a second lockdown. Forecasters expect an outright contraction in the fourth quarter as a whole.

Thursday’s reading leaves the size of the economy 7.9% lower than before the pandemic struck, the Office for National Statistics said. That’s a slower recovery than most major economies, and will raise further questions over the government’s handling of the crisis.

While there is some hope that vaccine developments will help kick start growth in 2021, the economy faces another threat in the form of Brexit.

Negotiators have until Sunday to come up with a deal after talks over dinner between Prime Minister Boris Johnson and European Commission President Ursula von der Leyen ended without a breakthrough. Failure to reach an accord could hurt growth in 2021, further hampering a recovery from the U.K.’s worst slump in three centuries.

The report comes the day the Confederation of British Industry warned cautious business investment is set to drag on the U.K.’s consumer and government spending-led recovery. The lobby group expects the economy to return to pre-pandemic levels by the end of 2022 but sees spending by firms remaining 9% lower than before the virus.

— With assistance by Andrew Atkinson

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