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The UK’s economy shrunk by a record 9.9 per cent in 2020, official figures show. The economic recovery slowed markedly in the final three months of 2020 as coronavirus restrictions were tightened to deal with a second wave of cases.
Output of goods and services expanded 1 per cent between October and December, following 16.1 per cent growth in the previous three months, the Office for National Statistics reported.
Each of the broad sectors of the economy grew in the final quarter of 2020, with services rising 0.6 per cent, production at 1.8 per cent and construction at 4.6 per cent.
That was not enough to make up for a record plunge in GDP during the first lockdown earlier in the year. The overall decline in 2020 was more than twice as deep as 2009 when the country was hit by a global financial crisis.
A third round of national lockdowns is expected to cause the economy to shrink further in the opening months of 2021. However, the Bank of England forecasts a rapid rebound in Spring 2021 as more people are vaccinated.
“Loosening of restrictions in many parts of the UK saw elements of the economy recover some lost ground in December, with hospitality, car sales and hairdressers all seeing growth. An increase in Covid-19 testing and tracing also boosted output,” ONS deputy national statistician for economic statistics Jonathan Athow said.
“The economy continued to grow in the fourth quarter as a whole, despite the additional restrictions in November.
“However, GDP for the year fell by nearly 10 per cent, more than twice as much as the previous largest annual fall on record.”
Looking back through the history books, the nearest comparable fall in output was during 1921 as the nation dealt with the aftermath of the First World War. The economy is estimated to have shrunk 9.7 per cent, although GDP was not calculated in the way it is today until years later.
Not since harvests failed after the Great Frost of 1709 has the country recorded a sharper decline.
Bank of England deputy governor Andy Haldane attempted to puncture the gloom with an upbeat assessment of the UK’s prospects on Friday.
He described the economy as like a “coiled spring” ready to release pent-up energy once people’s confidence is restored.
Writing in the Daily Mail, Mr Haldane said: “With 13 million of the most vulnerable people already vaccinated, the risk of death or hospitalisation in the UK has already probably halved.
“By the end of March, based on the current pace of vaccine rollout and government data on vulnerable groups, this risk may have been reduced by as much as three-quarters and by the end of the second quarter it will be even smaller.”
Chancellor Rishi Sunak said: “Today’s figures show that the economy has experienced a serious shock as a result of the pandemic, which has been felt by countries around the world.
“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.
“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.”
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