Britain’s economy shrank by the most in 300 years in 2020 amid the fallout from the coronavirus pandemic but has avoided a double-dip recession, according to official figures.
The Office for National Statistics said gross domestic product (GDP) fell by 9.9% in 2020 as no sector of the economy was left unscathed by lockdowns and plummeting demand during the pandemic. It was the biggest fall in annual GDP since the Great Frost of 1709, when the economy shrank by 13%.
However, the latest figures showed the economy has narrowly avoided a double-dip recession, with growth of 1% in the final quarter of the year. Looser Covid restrictions in the run-up to Christmas enabled GDP to grow by 1.2 in the month of December, following a 2.6% fall in November.
Pubs, bars and restaurants were able to recover some lost ground and retail sales improved in December, after the November lockdown in England ended and before tougher measures were imposed at the end of the year as infections surged. Growth was also fuelled by a rise in healthcare activity, mainly because of coronavirus test and trace schemes across the UK.
Growth of the economy in December despite tougher public health restrictions also came as companies adapted to the measures by shifting working patterns and altering their business models – including a boom in online shopping, and pubs and restaurants operating takeaways.
The UK economy shrank by 2.9% in the first quarter of 2020 as the pandemic first spread to the UK before falling by a record 19% in the second quarter during the spring lockdown, among the biggest declines in the western world as Britain delayed entering lockdown and took longer to relax restrictions.
The economy then grew at a record 16.1% in the third quarter, fuelled by the summer reopening of the hospitality sector, before the second wave of the pandemic forced the launch of renewed restrictions.
Rishi Sunak, the chancellor, said the latest figures showed Britain’s economy had experienced a “serious shock” as a result of the pandemic. “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,” he said.
“That’s why my focus remains fixed on doing everything we can to protect jobs, businesses and livelihoods. At the budget I will set out the next stage of our plan for jobs, and the support we’ll provide through the next phase of pandemic.”
Although the economy has avoided a double-dip recession, analysts said it was probably shrinking at the start of the year as the toughest Covid lockdown restrictions since the first wave weigh down activity.
Dean Turner, an economist at the Swiss bank UBS, said: “The monthly GDP series shows that the UK’s dominant services sector returned to growth in December but this is unlikely to last. The tighter restrictions imposed towards the end of last year, which are likely to remain in place for much of the current quarter, suggest that the economy may shrink again.”