This means that the Covid-19 pandemic has effectively wiped out all growth in the UK over the past seven years, and the economy has once again been almost as large as it was in 2013.
The 9.9% slump in British GDP was less severe than expected, but still surpasses the 9.7% collapse experienced during the Great Depression in 1921, making it the worst annual decline since 1709, according to a database of the Bank of England. That was when Europe’s fiercest winter in 500 years caused widespread death and destruction.
“This time it’s a pandemic to blame, while at the time it was a major frost that saw ice in the North Sea, and the war of Spanish succession … that caused the damage,” the Societe Generale strategist said. Kit Juckes wrote in an article. research note Friday.
There were some signs of improvement in the last months of 2020, with GDP rising by 1% in the fourth quarter, following record growth in the third, according to the Office for National Statistics.
But there was a big swing in production between October and December, largely tracking the level of restrictions imposed to contain the coronavirus.
The UK suffered one of the worst recessions below major economies last year. Germany, for example, remained better off in the pandemic than during the global financial crisis. Preliminary estimates suggest that Europe’s largest economy shrank by 5% last year. According to Eurostat, EU GDP is expected to have shrunk by 6.4%.
The United States performed even better in comparison, with GDP falling by 3.5% compared to the previous year.
“Today’s figures show that the economy has experienced a severe shock as a result of the pandemic, which is being felt by countries around the world,” British Finance Minister Rishi Sunak said in a statement. “While there are some positive signs of the resilience of the economy during the winter, we know that the current exclusion still has a significant impact on many people and businesses.”
The new national exclusion in the UK, introduced on 5 January, is expected to hit the economy hard in the first quarter of 2021, reversing the return to growth in the fourth quarter of 2020.
‘It looks like a double dive [recession] was simply delayed rather than avoided altogether, ‘Sam Miley, an economist at the London Center for Economics and Business Research, said in a note on Friday.
The disruption of trade between the EU and the UK after the end of the Brexit transition period on 31 December also weighs on the activity.
British exporters have struggled to get their products to Europe due to border delays and errors in new customs systems. Companies that sell fresh produce, such as live shellfish and meat, have in some cases had to throw away their produce as a result. Even once the dust settles, new trade arrangements are expected to add additional costs to UK businesses, which rely heavily on Europe’s imports and exports.
The pandemic has left more than a quarter of UK adults financially vulnerable, with too much debt or not enough savings to deal with a ‘negative life event’ such as redundancy, loss of working hours or poor health, according to a survey which was published on Thursday by the Financial Conduct Authority (FCA).
The survey also found that almost 40% of British adults suffered financially as a result of the pandemic, with younger workers, black people and the self-employed being hit the hardest.
But half of the adults in the FCA survey said the pandemic did not disrupt their finances, while about 15% of adults were financially better off. According to Andy Haldane, chief economist at the Bank of England, this could be the basis for an increase in demand through savings, which showed in a poll on The Daily Mail on Thursday on high savings rates among British households.
“The rapid implementation of the vaccination program in the UK means that a decisive angle has been turned in the fight against Covid,” he said. “A decisive angle is also going to be turned for the economy, with huge amounts of pent-up financial energy waiting to be released, like a coil spring,” he added.
– Will Godley contributed to this article.
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