Molly Darlington / Reuters
- The British economy shrank by 2.6% in November when England closed again.
- Britain is on the brink of a double recession and faces a difficult winter as COVID cases increase.
- However, a rapid vaccination of the vaccine can help restore the economy in spring and summer.
The UK economy shrank by 2.6% in November as an increase in coronavirus infections and new restrictions took a heavy toll, official figures showed, putting the country on track for a double-dip recession.
The November drop was significantly lower than the 5.7% contraction that economists predicted in a Reuters poll. But that means the economy was 8.5% smaller than in February 2020 and 6.1% smaller in October, the National Statistics Office said.
Since November, the British government has tightened its closure measures, which means the economy is suffering even more.
Ministers are focused on the introduction of coronavirus vaccines, which they hope can start reflecting growth again in the spring.
The contraction of 2.6% in November, when England was placed in a month-long closure, follows an expansion of just 0.6% in October.
Britain’s main services sector shrank by 3.4% in November, the ONS said, but the manufacturing sector shrank by just 0.1%.
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This puts the UK on course for a double-dip recession – with the economy plummeting into a sustained period of contraction after re-emerging in the third quarter of 2020.
Coronavirus cases have skyrocketed in recent weeks, thanks in part to a new, more contagious variant. More than 370,000 people tested positive over the past seven days, while more than 7,500 people died, an increase of 50% from the previous week.
Chancellor Rishi Sunak said of the economic figures: ‘It is clear that things will get harder before they get better and today’s figures highlight the extent of the challenge we face.
“But there are reasons to be hopeful. Our vaccination of vaccines is well underway and through our job plan we are creating new opportunities for the needy,” the finance minister said.
The UK economy shrank at a record pace of around 20% in the second quarter of the year before growing by around 16% in the next three months.
But many economists now predict that gross domestic product will shrink in the last quarter of 2020, and according to many people, it will shrink further in the first three months of 2021.
The pound fell Friday morning and fell 0.2% on the day against the dollar to trade around $ 1.3663, although it was below a session low of $ 1.3659.
The FTSE 100 fell by 0.42% in public when traders consumed the data. The UK benchmark for ten-year gold yields was a mustache lower at around 0.287%.
Many analysts stressed that the decline in GDP in November was not as severe as expected. Alpesh Paleja, chief economist of the British Confederation of British Industry, said the impact of the weakening restrictions in November was “significantly smaller than the downturn seen in the spring”.
“The steps taken by businesses earlier this year to COVID their operations – combined with the limited time limit and schools remaining open – have meant that more companies have been able to proceed safely.”
However, Goldman Sachs predicted last week that the new nationwide exclusion introduced earlier this month would shrink the UK economy by 1.5% in the first quarter of 2021.
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“We estimate that by the end of the first quarter, the economy will be about 11% below its level ahead of COVID,” Goldman Sachs said.
“The fundamental reason is that UK activity is more dependent on covid sensitive consumer spending than any of the other major advanced economies.”
The Bank of England increased its £ 150bn ($ 205bn) bond buying program in November in an effort to ease economic conditions amid new closures.
BoE Governor Andrew Bailey said on Tuesday that Britain was facing a ‘very difficult period’. Yet he said that ‘the darkest hour is the day before dawn’.
Bailey said on Tuesday there were “many problems” with lowering interest rates in negative areas from the current record low level of 0.1%. His comments helped the pound.