Wednesday 6 January 2021 6:56 am

UK on course for double-dip recession amid lockdown ‘gloom’

The UK is on course for a double-dip recession as a fresh lockdown compounds the “strikingly downbeat” end to 2020, according to a new report.

After the sharpest decline in history in the second quarter last year, indicators showed economic activity improved only slightly in the last three months of the year and remained well below pre-pandemic levels.

Read more: Rishi Sunak rolls out more financial support after sinking businesses demand immediate lifeline

Nearly half of firms reported decreases in domestic sales, rising to more than three-quarters for companies in the hospitality and catering sectors, according to the British Chambers of Commerce (BCC).

This is compared to two-thirds in the third quarter, but remains below the 94 per cent recorded in the second quarter.

Just over a quarter of respondents reported an increase in sales, while 30 per cent reported no change.

The BCC’s quarterly economic survey found that continued uncertainty around restrictions and Brexit had caused companies “considerable distress”, with some worrying about the long-term viability of their businesses.

The third national lockdown, which comes into law today, will only add to the difficulties.

“These results indicate that economic activity was strikingly downbeat in the final quarter of 2020 as the re-introduction of tighter coronavirus restrictions weighed heavily on the key drivers of growth,” said Suren Thiru, head of economics at the BCC.

“Though the vaccine rollout provides real optimism, a new national lockdown means that a significant double-dip recession in the first quarter of this year is looking increasingly likely.” 

Read more: Three quarters of small businesses set to hire next year as vaccine boosts confidence

One relatively bright spot was the manufacturing sector, which saw a faster rate of improvement in domestic and export sales, though the indicators remained in negative territory.

However, the BCC said this was more likely to be a temporary boost from Brexit stockpiling than evidence of recovery in the sector.