Coronavirus and the impact on output in the UK economy: September 2020

• Monthly gross domestic product (GDP) rose by 1.1% during September 2020 but was 8.2% below February 2020 levels.

• September 2020 saw the fifth consecutive month of growth, but the rate of recovery has slowed each month since the largest rise of 9.1% in June 2020.

• Across services, the monthly growth was driven professional services, education and health, while accommodation and food and beverage service activities declined.

• Of the 51 service industries, 10 had September 2020 output levels that were less than 80% of that recorded in February 2020.

• Within manufacturing there was widespread growth, but this was largely offset by a fall in the pharmaceutical industry; aircraft production and motor vehicle manufacturing saw respective September 2020 output levels that were 26.2% and 21.1% below those of February 2020.

• Construction output grew by 2.9% in September 2020, driven by increases in both new work (2.7%) and repair and maintenance (3.4%); this is the fifth consecutive month of growth but the lowest rise in that time.

• Quarter 3 (July to Sept) 2020 saw a rise of 15.5% in GDP following a fall of 19.8% in Quarter 2 (Apr to June) 2020; Quarter 3 GDP was 9.7% below Quarter 4 (Oct to Dec) 2019 levels.

This article analyses the overall impact of the coronavirus (COVID-19) pandemic on the output measure of gross domestic product (GDP) during September 2020, providing an in-depth insight into the impacts of the coronavirus pandemic on the UK economy.

Monthly GDP in September 2020 was 8.2% below the level of February 2020, having risen by 1.1% compared with August 2020 (Figure 1). This compares with rises of 2.7% in May 2020, 9.1% in June 2020, 6.3% in July 2020 and 2.2% in August 2020. The monthly rise reflects growth across construction, manufacturing and services.¹ For more details, please see GDP monthly estimate, UK: September 2020.

The output of:

• services industries remained 8.8% below the level of February 2020, growing by 1.0% in the latest month

• production industries remained 5.6% below their February 2020 level, growing by 0.5% in the latest month

• manufacturing has declined by 8.1% since February 2020, growing by 0.2% during September 2020

• the construction industry remained 7.3% below the February 2020 level, growing by 2.9% in the latest month

After lower levels of restrictions during the summer, on 14 September the rule of six was introduced in England, and on 24 September a new set of guidelines and restrictions was implemented. Anecdotal evidence from our Monthly Business Survey (MBS) showed that restrictions had impacted food and beverage services. During September, local restrictions were in place in different parts of the UK. For example, South Wales' local authorities entered new local restrictions between 8 and 28 September.

Analysis of selected industries

We can analyse the level of output and growth between February and September 2020 for each industry within services (Figure 2) or manufacturing (Figure 3) by placing them in one of five groups:

• Group 1 industries, which are those that have met or exceeded their February 2020 level of output

• Group 2 industries, which are those that are between 90% and 99% of their February 2020 level of output

• Group 3 industries, which are those that are between 80% and 89% of their February 2020 level of output

• Group 4 industries, which are those that are between 50% and 79% of their February 2020 level of output

• Group 5 industries, which are those that have achieved less than 50% of their February 2020 level of output

Figure 2: Four services industries remained below 50% of their February 2020 level

Services industries, monthly growth, seasonally adjusted, UK, September 2020 compared with February 2020

Data download

Within services, there are six industries in Group 1 that have achieved positive growth compared with February 2020, accounting for 27% of services output. These include postal and courier activities, retail, and public administration. A further 23 industries are within Group 2, accounting for 47% of services output.

However, 21 industries, accounting for 27% of services, were still below 90% of their February levels in September. These include 11 industries (10%) in Group 3 and six industries (15%) in Group 4. Group 5 contains four industries (2%) that failed to reach 50% of their pre-February 2020 level. These are travel agencies, air transport, rail transport, and creative, arts and entertainment where social distancing guidelines continued to have a significant impact in September.

Figure 3: Most of the manufacturing industries remained below their February 2020 level

Manufacturing industries, monthly growth, seasonally adjusted, UK, September 2020 compared with February 2020

Data download

Within manufacturing, 13 industries, accounting for 26% of manufacturing output, have experienced growth since February, including pharmaceuticals, grain mill products, textiles and electrical equipment. A further 17 industries are within Group 2, accounting for 32% of manufacturing output.

This leaves 14 industries that were failing to reach 90% of their February levels in September, including 10 industries (26%) in Group 3 and four industries in Group 4 (16%). Group 4 contains manufacture of motor vehicles, manufacture of aircraft, repair and maintenance of aircraft, and oil refining. There are currently no Group 5 industries in manufacturing.

Business inactivity remains above normal levels

In September 2020, the number of businesses submitting returns to our MBS with zero turnover was 6.8% in September 2020, compared with 7.6% in August 2020. This remained above the levels seen in February 2020 when 5.7% of businesses reported zero turnover. However, this is a significant improvement on the peak in April 2020 when 15.6% of businesses reported zero turnover.

These figures are supported by our analysis of Coronavirus and the economic impacts on the UK. From Waves 13 and 14 (which covered 24 August to 20 September 2020) of the Business Impact of Coronavirus (COVID-19) Survey (BICS): preliminary weighted results, 83.9% and 86.3% of businesses by count, respectively, reported currently trading as their current trading status, while 13.2% and 12.4% of businesses by count, respectively, reported that they had temporarily closed or paused trading. BICS includes all industries in our MBS and so also includes retail and construction businesses as well as production and services.

Notes for: The UK economy during the coronavirus (COVID-19) pandemic

1. Services comprise 79.0% of the UK economy, while production (including manufacturing) and construction comprise 13.9% and 6.4% respectively.

The output of service industries grew by 1.0% during September 2020 and was 8.8% below the level of February 2020.

Of the 14 sections, 10 saw growth (Figure 4), led by professional services, education, health, and transport and storage. However, accommodation and food services and information and communication both saw falls while two sections including wholesale and retail trade and motor trades were flat.

Against this background, only 6 of the 14 sections exceeded 90% of their February 2020 level of output in September 2020 and of these, only two have surpassed their February level: wholesale and retail and motor trades and public administration.

Professional, scientific and technical activities

Professional, scientific and technical activities grew by 3.9% during September 2020 but were 9.0% below their February 2020 level. Advertising saw the largest rise at 8.7%, which was widespread after a flat August 2020. However, the industry remained 18.6% below its February 2020 level of output, the weakest performer in this section.

There were significant and widespread increases of 5.4% in accountancy services and 5.1% in legal activities following small falls in both during August. Large businesses in both industries have returned to the level of output they experienced in February, but smaller businesses have failed to recover. Elsewhere, there were also rises of 3.9% in research and development and 2.7% in architects and engineers, driven mostly by large engineering businesses.

Education

Education grew by 4.8% during September 2020 as schools made further advances in returning to normal levels of teaching, primarily through increased attendance. However, coronavirus (COVID-19) related absences continued to hinder progress, and the output of non-market education has now reached some 88% of its previous level. The recent blog, School's Out: measuring education output in the summer of the pandemic, explains our approach in this area, which builds on an earlier blog, Public services: measuring the part they play in the economy through the pandemic, which outlined our approach to measuring education output.

Other education is dominated by higher education, which fell by some 1.5% in September 2020. There is clear anecdotal evidence that general income streams have been significantly impacted and play a part in the industry only returning to some 92% of its February 2020 level in September 2020.

Human health and social work activities

Growth of 4.6% in human health was the main driver during September 2020 as patient services continued to see increases with accident and emergency admissions nearing more normal levels. However, the industry remained 27.3% below February 2020 levels primarily because of negative impacts from outpatients. The rate of improvement has slowed from the 7.2% achieved in July 2020 and 6.5% in August 2020.

Transportation and storage

The transportation and storage sector grew by 3.5% during September 2020 but was still 13.5% below the February 2020 level of output. Land transport services provided significant growth of 5.9% primarily because of passenger transport. Anecdotal evidence from the Monthly Business Survey (MBS) showed that this was partly because of the resumption of school transport services. Department for Transport data on Transport use during the coronavirus (COVID-19) pandemic supported our survey, with bus services outside London rising from an average of 43% of 2019 levels in August 2020 to 54% in September 2020. There was more muted growth in London.

The rail services industry grew by 14.2% but remained 52.2% below February 2020 levels, while warehousing increased by 1.5%. Similarly, post and courier activity returned to growth of 1.5% during September 2020, following a fall of 2.1% in August 2020 and was 8.4% above its February 2020 level of output, boosted by online retailing (see Retail sales, Great Britain: September 2020).

Other notable growth

Elsewhere, other personal services grew by 5.3% in the latest month because of increases in hair and beauty and dry-cleaning. Sport activities grew by 5.5% in September 2020, fuelled by large businesses, while the smallest businesses have continued to decline since the increases seen in July 2020. Employment activities rose by 2.5% between August and September 2020 because of widespread growth, but the industry remained 21.2% below its February 2020 level.

Accommodation and food services

Food and beverage services, which includes restaurants, cafés, takeaways, pubs, canteens and catering, fell back by 9.8% during September 2020 following a 63.9% rise in August 2020 (Figure 6). There were widespread falls across restaurants and pubs following the end of the Eat Out to Help Out Scheme (EOTHO). However, these falls were partially offset by an improvement in canteens, in part because of the return to school, and an increase in the numbers of businesses reporting activity. In September 2020, only 5.8% of business returns to our survey were of zero turnover, an improvement on the 7.4% reported in August although still short of the 2.3% level seen in February 2020. The industry was 22.9% below its February 2020 level in September.

Hotels and accommodation similarly fell by 4.6% during September 2020, following growth of 81.3% in August 2020 (Figure 6). Camping and caravan sites fell from their record August 2020 levels while hotels also declined in part because of the end of the EOTHO, with restaurants in hotels benefiting from the scheme. However, business activity increased with 4.5% of business returns to our survey reporting zero turnover in September 2020 compared with 8.3% in August 2020, particularly in hotels. This remains above the 2.8% level of zero returns in February 2020. The industry was 24.9% below its February 2020 level in September.

Information and communication

The small decline in September 2020 was largely because of a 4.3% fall in publishing, which was widespread. Small decreases in film and television production and telecommunications also contributed to the fall. In addition, information services contracted by 3.1% as large businesses fell back from a strong August 2020 position. Finally, programming and broadcasting returned to more normal levels, picking up by 4.5% from a weak August 2020.

Wholesale and retail trade: repair of motor vehicles

Growth in the sector was flat during September 2020 with the level of output 0.3% above the February 2020 level.

Retail grew by 1.5% during September 2020 (see Retail sales, Great Britain: September 2020), with output 5.7% above February 2020 levels for the industry.

However, motor trades fell by 3.2% in September 2020 (Figure 7) because of falls in car sales and sales of parts and accessories, although maintenance displayed more resilience and remained flat. Output in September 2020 was 1.4% below February 2020 levels.

Wholesale (excluding motor vehicles) also fell by 0.6% during September 2020 and remained 6.2% below February 2020 levels, with much of the change in levels because of the impact from fuels. Within wholesale, compared with September 2019, only household goods turnover at current prices was higher in September 2020.

Production output during September 2020 continued to be affected by the coronavirus (COVID-19) pandemic, and it was 5.6% below the level of February 2020, the last full month of “normal” operating conditions.

Production output increased during September 2020 by 0.5%, driven by positive contributions from all four subsectors (Figure 8).

September’s growth is the fifth consecutive period of monthly growth but should be interpreted in the context of the ongoing recovery, following weakness displayed during March and April 2020 because of the significant impact of the coronavirus pandemic. It should also be noted that strength during August and September 2020 has been muted, in comparison to growth during May, June and July 2020, suggesting that the recovery has slowed (Figure 9).

Monthly growth from manufacturing of 0.2% was widespread, with 10 of the 13 subsectors displaying upward contributions (Figure 10). The strong negative contribution from pharmaceuticals partially offsets overall strength and without this impact, growth would have been 1.3%.

Despite being the fifth consecutive monthly growth since April 2020, manufacturing output was still 8.1% below the level of February 2020.

Following strong growth from the manufacturing sector during May, June and July 2020, as lockdown restrictions were eased, August's and September's growth was muted, despite only a comparatively limited number of lockdown restrictions across the UK remaining.

Following a significant fall in both export and domestic turnover growth during April 2020, both variables have partially recovered during September 2020, when compared with their February levels, suggesting the further re-opening of UK and worldwide supply chains amid the easing of lockdown restrictions.

However, we received responder-led evidence suggesting that some businesses that experienced reduced levels of output during September 2020 had still been impacted by the loss of usual trading or factory operating conditions because of social distancing requirements and a lack of consumer demand.

Given the continued widespread impact of the pandemic across production and manufacturing, we have highlighted the most interesting anecdotal evidence, both positive and negative, on subsector- and industry-level growth.

Food products

The food products industries were 3.0% weaker in September than in February 2020, with the other food products category (this includes sugar, tea and coffee processing, manufacture of prepared meals, condiments, and seasonings) the hardest hit.

September 2020 saw a negligible 0.2% increase compared with August 2020. Five of the eight sub-industries within this sector rose.

The subdued nature of the growth is because of a variance in demand for food products with rises from meat and meat products; fish, fruit and vegetables; bakery and other farinaceous products; and dairy products being partially offset by falls from other food products (demand for sandwiches and prepared meals were hardest hit), prepared animal feeds and grain mill products, and starches and other starch products.

The end of the Eat Out to Help Out Scheme (EOTHO) during August may have led to a fall in demand during September for those manufacturers facing the hospitality sector. In contrast, those facing the food stores sector may have benefitted from a rise in volume sales in food stores of 1.4% during September 2020, as reported by our latest Retail Sales Index release. This may be a result of the government tightening restrictions for other services such as bars and restaurants at the end of September, which may have encouraged spending in food stores.

Elsewhere, some responders that saw increased demand from the "panic-buying phase", prominent in supermarkets during March 2020, have seen turnover return to typical levels over the recent months. Also, demand for some seasonal products such as ice cream, BBQ products and others have been impacted by social distancing restrictions on large gatherings, live events and a general downturn in demand in some tourist areas during the summer months.

Alcoholic beverages and soft drinks

There was a monthly decline of 1.8% for this subsector, with distillers hardest hit. Output was 5.7% weaker in September than in February 2020.

Decreased output from both the alcoholic beverages and soft drinks industries is perhaps reflective of a calming of demand following the re-opening of pubs in England during July, when the industry saw significant growth and the end of the EOTHO, which likely boosted demand during August.

Wood and wood products except furniture

Following notable growth over recent months, the wood and wood products except furniture industry continued to recover, rising by 2.9% during September 2020.

Output remained 8.1% above its February 2020 level, primarily because of the continued evidence of increased demand for DIY products as people spent more time making home improvements during lockdown. This is supported by our Retail Sales Index release for September 2020, which evidenced that household goods stores saw an increase in volume sales in September 2020 at 11.0% compared with February 2020, mainly because of increased sales for home improvement items.

Basic pharmaceutical products

Despite a monthly decline of 9.8%, which offsets much of the overall strength in manufacturing during September, output remained 1.2% above its February 2020 level. The monthly fall was mainly because of the cumulative impact of weakness from large businesses and highlights the volatile nature of growth in the basic pharmaceutical products industry.

Electrical equipment

The electrical equipment sector continued its recovery, rising by 1.4%, the fifth consecutive monthly growth, with output at 2.6% above its February 2020 level.

Strength within this subsector is widespread, with all four component industries performing strongly, mainly because of the cumulative impact from large businesses. This strength is highlighted by our latest Monthly Business Survey (MBS) turnover in production industries dataset, where it was reported that turnover for Quarter 3 (July to Sept) 2020 compared with Quarter 2 (Apr to June) 2020 rose by 32.7%.

Transport equipment

Sector-level growth of 4.1% during September 2020 continued the recovery, but this should be noted in the context of output being 22.3% weaker than in February 2020.

Monthly strength was led by motor vehicles, trailers and semi-trailers. This industry displayed a rise of 7.0%, following the impact of August shutdowns, although output was 21.1% lower than the February 2020 level. Furthermore, this industry had declined prior to the pandemic, with output 30.4% below July 2019 in September 2020 (Figure 11).

Because of ongoing weak global demand, car production remained significantly below normal levels. The Society of Motor Manufacturers and Traders (SMMT) reported that during September 2020, the total number of cars manufactured and the total number of cars exported had declined by 5.0% and 9.7% respectively on September 2019 levels.

The air, spacecraft and related machinery industry rose by a negligible 0.9% during September 2020, but output was 26.2% weaker than in February 2020. As a result of the widely reported negative impact on global civil aviation, manufacturers facing this sector have been severely impacted. Continued uncertainty over worldwide travel and quarantine restrictions, during what should be a busy period for the industry, has impacted passenger numbers.

Figure 11 shows that the lack of demand has reduced output for both industries, in comparison with total manufacturing output and with their February 2020 level. Additionally, supply chains for both industries have been negatively impacted, which in turn had a negative effect on associated industries in other subsectors across manufacturing.

Other manufacturing

Following consecutive periods of strength from May to August 2020, the other manufacturing industry fell by 4.9% during September, although output remained above February 2020 levels, at 2.7%.

Respondent-led evidence suggested a continued positive effect in September from increased demand for medical equipment (for example, personal protective equipment (PPE), ventilators and oxygen tubing). In contrast, we also received respondent-led evidence of decreased demand for other medical equipment, linked to restricted access to some NHS services, closed surgeries and a reduction in elective surgeries.

Following the re-opening of schools, there was less demand for toys and games in September.

Mining and quarrying

The monthly sector-level rise during September 2020 of 1.3% was mainly because of increased output from oil and gas extraction, which rose by 1.1%. This follows the impact of additional maintenance during August 2020.

Sector-level output was 2.7% below the February 2020 level, driven by oil and gas extraction, at 2.9% below the February 2020 level.  

Construction output grew by 2.9% (£369 million) in September 2020 compared with August 2020 because of increases in most sectors. Public other new work, infrastructure and public new housing were the only sectors not to see monthly growth in September 2020.

This is the fifth consecutive month of growth in all work since the record decline in April 2020 but is also the lowest monthly growth since then. The level of output in September 2020 remained 7.3% (£1,026 million) below the February 2020 level. For more information, please see Construction output in Great Britain: September 2020.

The Monthly Business Survey (MBS) is the primary data source for 75% of production industries and 50% of services industries. This is an online questionnaire where businesses are asked to provide their turnover and, if they are within manufacturing, export turnover.

Survey response

Response by turnover for services industries in September 2020 was 79.8%, up on the 77.7% achieved in September 2019 (see Historical MBS (services) response rates).

Response by turnover for production industries was 84.0% in September 2020, up on the 72.0% achieved in September 2019 (see MBS (production) response rates).

The response by turnover for the construction industries for September 2020 was 70.2% (see Table 6 in the Construction output in Great Britain: September 2020 release). This is partially because data collection for the MBS for construction and allied trades has been transitioning to an online questionnaire since April 2020.

Other data sources

Other data are primarily sourced from the Office for National Statistics (ONS) (for example, government expenditure, household expenditure and financial corporations expenditure) but also other bodies such as the Department for Transport, the Civil Aviation Authority and the Department for Business, Energy and Industrial Strategy. These account for 50% of services industries and 25% of production industries. We are also able to gain intelligence from these data providers regarding monthly changes in their data.

We also use the fortnightly Business Impact of Coronavirus (COVID-19) Survey (BICS) as part of our quality assurance and validation process.