UK recovery begins to falter amid shortage of workers and supplies

Guardian analysis suggests double whammy of Covid and Brexit causing more than supply chain disruption

Britain’s economic recovery from the winter lockdown is showing signs of stalling amid shortages of workers and supplies due to the double whammy of Covid and Brexit, according to a Guardian analysis. Despite the easing of most government pandemic restrictions, consumer caution appears to have crept higher in the past month as the Delta variant fuels a persistently high infection rate. In the meantime, UK businesses have come under pressure from global supply chain disruption and staff shortages.

Figures from the Bank of England show debit and credit card spending has fallen to 94% of its pre-pandemic level in recent weeks as the initial buzz from shops, pubs and restaurants reopening fades to a lower level. Footfall in town and city centres remains below pre-Covid levels, while retail sales unexpectedly dropped in July. “The recovery has stopped in its track,” said James Smith, an economist at the Dutch bank ING. “The rise in self-isolation clearly had an effect on services spending, and the supply chain issues are having an impact on manufacturing.”

For more than a year, the Guardian has tracked the economic fallout from the pandemic on a monthly basis, following infection rates, eight key growth indicators and the level of the FTSE 100. Faced with the deepest global recession since the Great Depression, the Covid crisis watch also monitors Britain’s performance compared with other countries. On the dashboard in the past month, there are bright spots as millions of workers come off furlough and unemployment continues to fall, confounding expectations that Covid would trigger the worst UK jobs crisis since the 1980s.

Government borrowing in July was down by about £10bn on the same month last year, in a reflection of the improving economic outlook. National output rose for the fifth month in a row in June, according to the latest figures, as the reopening of the economy from lockdown lifted consumer spending. However, worrying signs are starting to show. Retail sales in Great Britain fell in July after a mini-boom a month earlier when England reached the final of the European Football Championship. Some of the decline was to be expected, as consumers switched from spending in supermarkets to eating and drinking in pubs, cafes and restaurants. However, analysts said the UK’s economic recovery from lockdown risked stalling.