The UK economy grew much more slowly than expected in August, setting back its recovery from the coronavirus lockdown.

Much of what growth recorded in August was down to a one-off government restaurant subsidy programme, official data showed today. 

UK gross domestic product rose by 2.1% from July, its slowest month-on-month increase since the economy began its recovery in May after a record slump.

It was not even half the median forecast of 4.6% in a Reuters poll of economists. 

"While the latest data confirms a rebound in economic activity continued into August, the sharp slowdown in growth indicates that the recovery may be running out of steam, with output still well below pre-crisis levels," Suren Thiru, head of economics at the British Chambers of Commerce said. 

"The increase in activity in August largely reflects a temporary boost from the economy reopening and government stimulus, including the Eat Out to Help Out Scheme, rather than proof of a sustained 'V'-shaped recovery," the economist said. 

More than half of the economic growth in August came from the accommodation and food sector, where output surged by 71.4%, boosted by the Eat Out to Help Out scheme to subsidise meals and easing lockdown restrictions, the ONS said. 

The UK economy - which shrank by more than any other Group of Seven nation in the April-June period - remained 9.2% smaller than its level just before the pandemic hit Britain, the Office for National Statistics said. 

"The economy continued to recover in August but by less than in recent months," said ONS deputy national statistician for economic statistics Jonathan Athow. 

The dominant services sector grew by 2.4% from July, a lot slower than expectations for growth of 5%. 

Growth in the smaller manufacturing and construction sectors also fell short of forecasts. 

Economists have warned that the British economy may struggle to grow in the months ahead as the number of Covid-19 cases began to rise in September and the government responded by tightening its restrictions on people gathering together. 

Bank of England Governor Andrew Bailey said yesterday that risks to Britain's economy were "very much on the downside" and the central bank was ready to use its policy firepower to limit the impact of a second wave of Covid-19 cases. 

The Bank of England is widely expected to increase its bond-buying programme in November in its next move to pump more stimulus into the economy. 

Britain is also facing the risk that it fails to secure a trade deal with the European Union with negotiations still ongoing ahead of the December 31 expiry of the country's post-Brexit transition period.

The British finance minister said today he knew many people were worried about the coming months, in comments that followed today's a disappointing set of economic growth figures for August.  

UK finance minister Rishi Sunak

"Today's figures show our economy has grown for four consecutive months, but I know that many people are worried about the coming winter months," Sunak said in a statement, adding that it was his goal to protect as many jobs as possible. 

Meanwhile, the UK today unveiled extra coronavirus jobs support, offering to pay up to two-thirds of staff monthly wages to firms forced to close over the winter months, as infection rates spiral.

Finance minister Rishi Sunak said the scheme, launched two weeks ago for workers taking reduced hours, will now also provide a "safety net for businesses across the UK who are required to temporarily close their doors" on a local or national basis in an attempt to cut transmission rates.