The Office for National Statistics (ONS) has this morning stated that the UK economy shrank by 9.9% last year as coronavirus restrictions hit economic output. This makes 2020 the largest slump ever. The economic contraction in 2020 has been described by the ONS’s deputy national statistician Jonathan Athow as “more than twice as much as the previous largest annual fall on record”.
In December, the UK economy grew by 1.2%. This was after shrinking by 2.3% in November, as some restrictions eased. In the October-to-December quarter, the economy grew by 1%. That growth does mean that the UK economy looks set to narrowly avoid its first double-dip recession since the 1970s.
Mr Athow from the ONS has said: “An increase in Covid-19 testing and tracing also boosted output. The economy continued to grow in the fourth quarter as a whole, despite the additional [lockdown] restrictions in November”.
The Chancellor Rishi Sunak has reacted to todays news by saying: “Today’s figures show that the economy has experienced a serious shock as a result of the pandemic, which has been felt by countries around the world. While there are some positive signs of the economy’s resilience over the winter, we know that the current lockdown continues to have a significant impact on many people and businesses. That’s why my focus remains fixed on doing everything we can to protect jobs, businesses and livelihoods”.
Kemar Whyte who is the senior economist at the National Institute of Economic and Social Research has forecasted that with Covid-19 restrictions expected to remain until early spring: “We anticipate a sharp decline in activity during the first quarter of the year. Nevertheless, growth will pick up from the second quarter onwards as restrictions ease on the back of a successful vaccination programme”.