Friday 15 January 2021 7:44 am

UK set for double-dip recession as GDP plummets 2.6 per cent

The UK economy shrank by 2.6 per cent in November as the Covid-19 pandemic took hold of multiple sectors across the country, according to new figures published this morning.

The Bank of England estimates Britain’s economy shrank by just over 1 per cent over the final three months of 2020.

With a new lockdown in place since January, the country is likely to have fallen into a double-dip recession.

GDP is now 8.5 per cent below its pre-pandemic peak, after its first monthly fall in output since the setback of the first national lockdown in April last year.

Services fell 3.4 per cent, 9.9 per cent below the peak, while manufacturing and construction grew 0.7 per cent and 1.9 per cent respectively.

Read more: Major UK business body calls for furlough scheme extension to July

Responses this morning

Jon Hudson, UK Equity Fund Manager at Premier Miton Investors, believes the UK will recover.

Hudson said: “With restrictions increasing in November it should come as no surprise that GDP growth took a backward step.

“A 2.6 per cent fall was better than many economists feared, with many retailers suggesting a pull forward of Christmas shopping in anticipation of harsher restrictions.

“With the UK leading the way on the vaccine rollout and Brexit concerns now in the rear-view mirror, we can look forward to an economic recovery from Spring with growing confidence.”

Read more: Govt says it won’t lower employment rights in Brexit wake

Suren Thiru, BCC Head of Economics, said: “The latest figures highlight the continued damage being done to the UK economy by coronavirus.  

“A clear and comprehensive plan is urgently needed to support the economy throughout this year, including closing the current gaps in government support and providing more significant grant funding to support cash-strapped businesses.

“A fit-for-purpose test and trace system remains critical to keeping the economy moving once the current lockdown ends.” 

Ayush Ansal, chief investment officer at the London-based hedge fund, Crimson Black Capital, added: “Unsurprisingly, the sectors dragging down the economy included retail, food services, accommodation, entertainment and the arts, all of which were among the hardest hit.

“If spring’s economic collapse sank a sabre-tooth fang into the GDP graph, it’s clear there are plenty more sharp teeth to come as the economy stop-starts.

“Markets have priced in a jagged recovery and are now looking along the curve to how the economy reacts to mass vaccination.

“All eyes now are on the future rather than the past.”

Read more: Bank of England bosses reassess 2021 GDP and jobs numbers as UK economy faces ‘darkest hour’