Industry calls for more support for businesses following slow GDP growth

Monthly GDP growth slowed in July 2021, rising by 0.1% compared with 1% in June, revealed the latest ONS data.

While this is the sixth consecutive month of GDP growth, it still remains 2.1% below its pre-coronavirus pandemic level in February 2020.

Construction contracted for a fourth consecutive month, with output down by 1.6% in July, and is now 1.8% lower than pre-Covid levels.

The fall in monthly construction output in July came mainly from private housing, which saw significant drops in new work (7.5%), as well as repair and maintenance (6.2%) — a result of the impact of price increases likely caused by product shortages in the sector.

Construction output was also 0.6% lower in volume terms in the three months to July, the first three-monthly decline since February 2021, driven by a fall in repair and maintenance of 2.9%.

Services output remained broadly flat in July and continues to stay 2.1% below the pre-pandemic level.

However, the latest data revealed a 1.2% increase in production output, which was the main contributor to GDP growth .

Property industry reacts to latest UK GDP results

Douglas Grant, director at Conister, said: “Today’s UK GDP data perhaps paints a more realistic picture of the UK’s recovery in light of recent positive figures. 

“Despite yesterday’s latest HMRC figures for the Coronavirus Job Retention Scheme (CJRS), which showed that there was a decrease of 340,000 staff on furlough, the slight slowdown in economic output reflects the plight of UK small businesses and current default levels caused by the ongoing impact of the pandemic which should be of real concern. 

“We must acknowledge that the UK’s business debt burden has ballooned to unprecedented levels and unfortunately this has already created a relentless flow of weak zombie-like companies falling off a loan default cliff. 

“It is imperative that we support sectors and businesses that are strong and nimble enough to adapt to the new economy and therefore continue contributing to its growth.”

He added that he was pleased to see government support businesses that have been mostly negatively impacted by Covid-19 through the introduction of the Recovery Loan Scheme, which he believed would act as a second support system for those businesses.

Kevin Drew, managing director at Ascentant Accountancy, added: “With an uncertain winter ahead and rumours of firebreak lockdowns, it's clear that small businesses need more support and the recent announcement of National Insurance increases will do little to comfort either new start-ups or firms that need to cut costs. 

“Whether as a result of an increase in employer National Insurance or dividend tax, the end of the furlough scheme or having to start to repay Covid support loans, for many small business owners it's increasingly feeling like a no-win situation."

Lewis Shaw, founder of Shaw Financial Services, commented: "With murmurs of a lockdown in October, fallout from Brexit, the furlough scheme about to wind down, a cut to universal credit affecting the poorest and, this week, a tax on jobs hitting the lowest paid and youngest workers, the omens for the autumn aren't exactly great. 

“There's arguably a lot of pain in the pipeline and this week's tax hikes are likely only the beginning of what's to come.”

Stuart Law, CEO at Assetz Capital, stated: “While construction output continues to decrease month on month, house prices have not followed suit, partly as a result of this reduced supply. 

“Although there has been some slowdown since the tapering of the stamp duty holiday, expectations that price growth will pick back up only increases pressure on housebuilders to meet demand for new homes to help moderate prices. 

“However, difficulties accessing raw materials, labour shortages, increased transportation costs and the realities of post-Brexit trade are making it difficult for housebuilders to complete ongoing projects and get new ones off the ground.”

According to Stuart, housebuilders will need increased support soon to meet the government’s building target.

“SME housebuilders in particular are often faced with significant operational challenges as suppliers favour bigger businesses with larger purchasing agreements for key materials. 

“Despite these difficulties, we’ve seen no shortage of housebuilders keen to leverage the current market appetite for new homes and have received hundreds of millions of pounds worth of loan applications for housebuilding projects over recent months. 

“Nonetheless, increased support in the form of simplified planning processes and improved access to additional dovernment funding would be well received by such businesses – particularly the smaller firms across the industry – as they look to best navigate the myriad of broader challenges currently facing them.”

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