British economy falters during summer as shortages build up

In this Sept. 30, 2021 file photo, drivers queue for fuel at a petrol station in London. Job vacancies in the U.K. rose to a record high of nearly 1.2 million, official figures showed Tuesday, Oct. 12, 2021, a further sign that the British economy is experiencing worker shortages in an array of sectors as a result of the coronavirus pandemic and Britain’s departure from the European Union. (AP Photo/Frank Augstein, file)

LONDON (AP) — Britain's economic recovery lost momentum during the summer despite the widespread lifting of coronavirus restrictions as supply chain issues took their toll, official figures showed Wednesday.

While the Office of National Statistics said the economy eked out some modest growth in August as bars, restaurants and festivals benefited from the first full month without coronavirus restrictions in England, the 0.4% increase was slightly lower than anticipated.

The agency also revised down July's figure from 0.1% growth to a 0.1% decline as a result of weaker data from a number of industries, highlighting the choppy nature of the economic recovery.

Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown said weakness is “seeping through” the figures especially in the construction sector, which has now reported four straight months of negative growth.

The British economy remains 0.8% below its pre-coronavirus pandemic level of Feb. 2020.

The International Monetary Fund forecast Tuesday that the U.K. will grow by 6.8% this year, more than any other Group of Seven industrial nation, and by a still-high 5% next. However, the British economy experienced the worst recession of the seven in 2020, contracting by 9.8% output.

With inflation set to hit at least 4% in the coming months amid rising energy bills, productivity levels low, taxes on the way up and an uncertain COVID backdrop heading into winter, there are worries that the economy will underperform over coming months.

Widespread shortages are also being reported across Britain, most clearly in the long lines that have been seen at gas stations in recent weeks and the empty shelves at supermarkets.

The causes of the shortages are widespread, partly related to global supply chains adjusting following the pandemic's disruption. However, Britain is facing particularly acute problems at the moment, with the number of truck drivers way down on usual. The causes are widespread, but it’s clear that the combination of Brexit and the pandemic prompted many European Union workers to leave the U.K. and head home.

The disruption is clearly visible at the east England port of Felixstowe, the U.K.'s largest commercial port. A logjam of containers and at the port has been blamed on a shortage of drivers and prompted shipping company Maersk to divert some of its biggest vessels.

The backlog at Felixstowe, which deals with 36% of U.K. freight container volumes, will add to concerns over the key Christmas period.

Peter Wilson, managing director at Cory Brothers shipping agency, said the U.K. has a “significant pinch point" around truck drivers and the demand on them to move goods from ports.

“That’s a really significant issue for us here in the U.K.," he told BBC radio.

Asked if it will affect Christmas, he said it has the “potential,” but stressed that the supply chain “will not fail in the U.K.”

However, he said there is potential that some items may not be available nearer to Christmas, including toys and food.