The UK economy grew for a third month in a row in July as pubs, restaurants and other sectors reopened after the coronavirus lockdown, but it remained around 12% smaller than its pre-pandemic level. 

After crashing by a record 20% in the second quarter, output expanded by 6.6% in July, slower than June's monthly rate, the Office for National Statistics said. 

Economists polled by Reuters had expected growth of 6.7%. 

British finance minister Rishi Sunak welcomed the figures but added that people were rightly worried about the coming months. 

The economy has recovered about half of its lost output but is still 11.7% smaller than its level in February, before the pandemic hit Britain. 

Thomas Pugh, an economist with Capital Economics, said the data suggested British GDP would show record-breaking growth in the third quarter after its unprecedented collapse in the three months from April to June. 

"However, July was probably the last of the big step-ups in activity and a full recovery probably won't be achieved until early 2022," he said. 

In response, the Bank of England was likely to ramp up its bond-buying stimulus programme by a third, or £250 billion, Pugh said. 

Britain's economy suffered the sharpest second-quarter fall of any Group of Seven nation in the April-June period. 

Hopes for a swift rebound have faded as businesses struggle to cope with social distancing rules and many people remain reluctant to travel on public transport or go to crowded places. 

Tensions between London and Brussels over a post-Brexit trade deal are also mounting. 

Unemployment is also expected to rise sharply because Sunak has ruled out extending his coronavirus job retention scheme which is due to expire at the end of October. 

Parliament's Treasury Committee today urged Sunak to "carefully consider" a targeted extension of the scheme and other support measures.

The pound fell slightly against the dollar as today's data showed output in Britain's dominant services sector was a bit weaker than expected, growing by 6.1% in July compared to expectations for growth of 7.0%. 

This included a 141% jump in accommodation and food as lockdown measures eased, but that sector's output was still 60% lower than its February level. 

Growth in the much smaller manufacturing and construction sectors exceeded forecasts. 

Complicating the outlook, Brexit risks have resurfaced. 

The European Union told Britain yestertday it should scrap a plan to breach their divorce treaty, but Prime Minister Boris Johnson's government refused and pressed ahead with a draft law that could sink four years of talks. 

We are far from out of the woods yet," Tom Stevenson, Investment Director, Personal Investing, at Fidelity International said, pointing to rising Covid-19 infections, new rules on social gatherings and the end of the furlough scheme. 

"Deteriorating relations with the EU make a no-deal Brexit in January more likely, adding to the UK's economic challenges and to downward pressure on the pound," he added.