Pandemic sees UK economy shrink at fastest rate since 1921
The Office for National Statistics revealed that gross domestic product (GDP) dropped by 9.9%.
However, after registering a 1.2% growth in December, despite strong restrictions across large parts of the country, the economy looks set to avoid what could have been its first double-dip recession since the 1970s.
A double-dip means two recessions within a short period of time, while a recession is defined as two consecutive quarters where the economy contracts.
“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%, more than twice as much as the previous largest annual fall on record.”
The 9.9% fall marks the worst year for the UK economy since records began.
GDP was first measured in the aftermath of the Second World War, and the measure has never previously dropped by more than 4.1%.
That last big drop was in 2009, but the Bank of England has also estimated historic GDP going bank centuries.
These measures come with caveats, but if correct, 2020 would be the worst year since 1921.
Ulas Akincilar, Head of Trading at the online trading platform, INFINOX, said: “By the narrowest of margins, the UK kept its 2020 economic decline to single figures. But this forecast-beating figure is the hollowest of victories.
“The fact remains that this is Britain’s largest annual fall in GDP on record, and the UK’s contraction was worse than that seen in many of its EU rivals.
“Nevertheless behind the grim headline figures, there is plenty to cheer the ‘glass half-full’ brigade.
“The UK economy has now posted two successive quarters of growth. The collapse seen during the first half of 2020 has not been repeated, and output continued to expand in the final month of the year.
“Of course the reimposition of a nationwide lockdown at the start of January has slammed the brakes back on, and behind the shuttered high streets and suspended animation of furlough, the economic scars are cutting deeper.
“Yet markets are taking this data on the chin. Sterling is at its highest level against the Dollar since 2018, and UK equities have a spring in their step as global investors are starting to see them as undervalued compared to the frothy prices on Wall Street.”