The UK economy shrank in November for the first time since the initial COVID-19 lockdown last spring, hit by a tightening of social-distancing rules.
The 2.6 percent monthly decline was much smaller than most analysts expected — a Reuters poll had pointed to a 5.7 percent contraction — but several economists said the nation was still likely to suffer a double-dip recession.
The British economy, which shrank more sharply than any other major advanced economy in the first half of last year, is now 8.5 percent smaller than it was before the start of the COVID-19 pandemic in February.
Photo: Reuters
“It’s clear things will get harder before they get better and today’s figures highlight the scale of the challenge we face,” British Chancellor of the Exchequer Rishi Sunak said.
However, the rollout of vaccines in Britain — which has been faster than elsewhere in Europe — was a reason to be hopeful, Sunak said.
Several economists warned that Britain was still on course for renewed recession, with the economy likely to shrink in both the final quarter of last quarter and the first three months of this year.
“A third lockdown means that a double-dip recession in the first quarter of this year may be inevitable, particularly if the current post-Brexit disruption persists through the quarter,” British Chambers of Commerce head Suren Thiru said.
The scale of the hit to the economy in November was much smaller than in the first lockdown last year, something the UK Office for National Statistics (ONS) attributed to businesses adjusting to social-distancing rules and schools remaining open.
However, with a third, tougher lockdown now in place, and the impact of the nation’s new, less open trading relationship with the EU also a drag on business, the country is facing major challenges early this year.
Bank of England Governor Andrew Bailey this week said that it was too soon to say if further stimulus would be needed after the central bank ramped up its bond-buying program to almost ￡900 billion (US$1.22 trillion) in November.
The data showed that the British economy in November was 8.9 percent smaller than a year earlier, a smaller drop than the 12.1 percent fall forecast in a Reuters poll.
In October the economy had been 6.8 percent smaller than a year before.
At its lowest point in April, when many businesses closed temporarily, output was a record 25 percent below its year-ago level.
November’s downturn was led by the services sector, where output fell 3.4 percent from October as pubs, restaurants, non-essential shops and many other consumer services businesses had to shut as part of a four-week lockdown in England and similar measures in other parts of the UK.
Part of the scale of the hit to Britain’s economy last year reflects a decision by the ONS to take account of disruption to routine medical care and schooling due to COVID-19, an approach which not all countries’ statistics agencies have taken.
Bank of England Deputy Governor Ben Broadbent has estimated this factor accounted for a quarter of the almost 9 percent annual drop in output recorded for the third quarter of last year.
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