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, my colleague Richard Partington writes.
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….
KPMG’s UK chairman, Bill Michael, has resigned after telling staff to “stop moaning” during a virtual meeting about the coronavirus pandemic and the impact of lockdown on people’s lives.
Michael, who has headed the company since 2017, was speaking at a virtual town hall meeting on Monday with members of the firm’s financial services consulting team when he made the comments.
The 52-year old Australian, who also said that staff should stop “playing the victim card” and described the concept of unconscious bias as being “complete and utter crap for years”, apologised and said on Friday the scandal over his comments had made his position at the accounting giant “untenable”.
“I love the firm and I am truly sorry that my words have caused hurt among my colleagues and for the impact the events of this week have had on them. In light of that, I regard my position as untenable and so I have decided to leave the firm. It has been a privilege to have acted as chair of KPMG. I feel hugely proud of all our people and the things they have achieved, particularly during these very challenging times.”
The sudden end of Bill Michael’s reign at KPMG UK is one of the more dramatic exits at UK PLC in recent years.
The Daily Telegraph has an interesting piece on his tenure, with insiders saying Michael had been sheltered from ad hoc public interactions to prevent him veering off-message (a mission which went awry this week…).
Here’s a flavour of the Telegraph piece:
When Bill Michael ran for election as KPMG’s chairman in the UK in 2017 some insiders jokingly referred to him as “the Donald Trump candidate”.
The 52-year-old Australian dismissed the moniker but his comments to staff this week raised parallels with the former US president, a noted opponent of coronavirus lockdowns and the “woke” Left.
At a virtual town hall meeting on Monday, frustrated staff vented about their working conditions and allegedly raised gripes over pay and bonuses.
Michael told them not to “sit there and moan” and to “take control of your life”. He also told staff, most of whom are working from home, that they were in a “very lucky sector”.
Accountants have been able to continue working with far less interruption than those in other industries.
Michael hit out at partners and other staff after conversations “where it almost feels that this is being done to them”.
Unimpressed, he told them: “You can’t play the role of victim unless you’re sick”.
Some snap reaction to Bill Michael’s departure at KPMG:
KPMG UK has announced that Bill Michael, its Chair and Senior Partner, has resigned and will leave the firm at the end of this month.
It comes after KPMG launched an investigation into comments made by Michael during an online meeting with the firm’s financial services consulting team on Monday, which shocked many staff.
In a statement, Bill Michael says he is ‘truly sorry’ for the impact of his comments, and sees his position as ‘untenable’:
“I love the firm and I am truly sorry that my words have caused hurt amongst my colleagues and for the impact the events of this week have had on them. In light of that, I regard my position as untenable and so I have decided to leave the firm. It has been a privilege to have acted as Chair of KPMG.
I feel hugely proud of all our people and the things they have achieved, particularly during these very challenging times.”
Michael had already stepped aside while City law firm Linklaters investigated his comments. Bina Mehta, Senior Elected Board Member, has stepped in as Acting Chair of the Board and Mary O’Connor, Head of Clients and Markets has assumed his day-to-day Executive responsibilities as Acting Senior Partner.
It is the first time that either role has been occupied by a woman in the 150-year history of the firm.
Acting chair Bina Mehta said:
“Bill has made a huge contribution to our firm over the last thirty years, especially over the last three years as Chairman, and we wish him all the best for the future.”
The firm adds that it will undertake a leadership election in due course.
Every sector of the UK economy suffered an extremely sharp slump in output last year:
- services fell by 8.9%
- production fell by 8.6%
- construction fell by 12.5%
- agriculture fell by 9.4%
And although growth was stronger than expected last month, Debapratim De, senior economist at Deloitte, predicts the economy won’t return to pre-pandemic size until next spring.
“While the economy registered its sharpest annual contraction on record last year, activity was 6.3% below pre-pandemic levels in December – a better outcome than many had expected.
“Stricter and more prolonged restrictions are likely to drive a further contraction in the first quarter before vaccinations and better weather enable a summer rebound. However, regaining lost activity due to the pandemic will take longer. We forecast UK GDP to reach pre-pandemic levels in spring 2022.
Economist Samuel Tombs of Pantheon has shown how the UK has suffered a worst slump than other major economies last year:
Economic research institute NIESR predicts the UK will suffer a ‘sharp decline in activity’ in the first three months of this year – until the Covid-19 vaccination programme spurs a recovery:
Here’s Reuters’ take:
Last year’s fall in output was the biggest since modern official records began after World War Two, and longer-running historical data hosted by the Bank of England suggest it was the biggest drop since 1709.
The fall is also steeper than almost any other big economy, though Spain – also hard-hit by the virus – suffered an 11% decline.
Britain has reported Europe’s highest death toll from COVID-19 and is among the world’s highest in terms of deaths per head.
Some of the damage also reflects how Britain’s economy relied more on face-to-face consumer services than other countries, as well as disruption to schooling and routine healthcare which few other countries factored in to GDP.
However, Britain has vaccinated many more people than other European countries so far, raising the prospect of a bounce-back for its economy later this year.
More here: UK economy suffers record 9.9% slump in 2020
Although the UK economy avoided a contraction in October-December, it is probably now shrinking due to the current lockdown restrictions.
Dean Turner, economist at UBS Global Wealth Management, explains:
“In lockstep with much of continental Europe, the UK economy fared better than feared in the final quarter of 2020. GDP expanded by 1%, a significant slowdown from the 16% growth over the previous three months, but a contraction was avoided.
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. However, what is clear from the data is the resilience and adaptability of firms and households, so any contraction will be modest. As and when restrictions are eased, we continue to expect a vigorous rebound in the economy
Alpesh Paleja, CBI Lead Economist, warns that the UK economy will continue to struggle until the pandemic is under control – and that means businesses need more help:
“The UK economy grew slightly towards the end of the last year, as a second lockdown in November was partly offset by a pick-up in GDP over December. But with restrictions tightening again in the New Year, we’ll likely see further dips in activity.
“Getting the pandemic under control is critical to our recovery, and speedy rollout of vaccines gives us some hope. But until we can end the stop-start cycle of lockdowns, businesses will need support to continue in parallel with restrictions.