Woman wearing a facemask walks over an empty Waterloo Bridge, PA picWoman wearing a facemask walks over an empty Waterloo Bridge, PA pic

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Pandemic caused UK economy to shrink at fastest rate since 1921

3 months ago

The UK economy slumped at its fastest rate since 1921 last year, thanks to the pandemic forcing thousands of businesses to stay shut for months.

Gross domestic product fell by 9.9 per cent, the Office for National Statistics revealed today (Feb 12).

But the economy still looks set to avoid what could have been its first double-dip recession since the 1970s, after car sales contributed to a 1.2 per cent growth in December, despite severe restrictions across the UK.

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A recession is two consecutive quarters showing the economy contracting, while a double-dip is two recessions within a short period of time.

Suren Thiru, head of economics at the British Chambers of Commerce, said: ‘Despite avoiding a double-dip recession, with output still well below pre-pandemic levels amid confirmation that 2020 was a historically bleak year for the UK economy, there is little to cheer in the latest data.’

All four sectors tracked by the ONS saw a fall in output, with the highest coming in the construction sector, which contracted by 12.5 per cent.

UK economic growth GDP via PA 12 Feb 2021

ONS deputy national statistician for economic statistics Jonathan Athow said: ‘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.

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‘An increase in Covid-19 testing and tracing also boosted output.

“The economy continued to grow in the fourth quarter as a whole, despite the additional restrictions in November.’

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The economy was helped in December by lockdown restrictions that had been in place in parts of the country in November being eased.

Increased buying in the run-up to Christmas also helped – as did stockpiling ahead of the end of the Brexit transition period

The health sector grew by 2.4 per cent after being involved with running coronavirus testing and tracing schemes across the UK.

The 10 worst years for UK GDP

    1. 1706: -15.3%
    2. 1709: -13.4%
    3. 1921: -10.1%
    4. 1919: -9.9%
    5. 2020: -9.9%
    6. 1710: -9.1%
    7. 1920: -7.7%
    8. 1703: -6.4%
    9. 1729: -5.6%
    10. 1737: -5.4%

    Data since 1700, Bank of England/ONS

    Chancellor Rishi Sunak, who is due to deliver this year’s Budget on March 3, said the figures revealed the ‘serious shock’ the pandemic has had on the economy.

    ‘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,’ he added.

    Shadow chancellor Anneliese Dodds countered: ‘These figures confirm that not only has the UK had the worst death toll in Europe, we’re experiencing the worst economic crisis of any major economy.

    ‘Businesses can’t wait any longer. The chancellor needs to come forward now with a plan to secure the economy in the months ahead, with support going hand-in-hand with health restrictions.’

    She called for a ‘smarter furlough scheme’ with the current system set to run out in April, as well as an extension to the business rates holiday plus VAT reduction for hospitality and tourism.

    2020’s 9.9 per cent fall was the worst year for the UK economy since records began.

    GDP was first measured after the Second World War, with it never previously dropping by more than 4.1 per cent.

    That last big drop was in 2009, but the Bank of England has also estimated historic GDP going back centuries. These measures come with caveats, but if correct, 2020 would be the worst year since 1921.

John Bowman

John has been with Car Dealer since 2013 after spending 25 years in the newspaper industry as a reporter then a sub-editor/assistant chief sub-editor on regional and national titles. John is chief sub-editor in the editorial department, working on Car Dealer, as well as handling social media.

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