That means that the Covid-19 pandemic has basically wiped out all of the UK’s growth over the past 7 years, bringing the economy back close to 2013’s size.
The 9.9% decline in UK GDP was less severe than expected, but still surpassed the 9.7% collapse during the Great Depression in 1921, making it the worst annual decline since a Bank of England database. 1709. That was when Europe’s harshest winter in 500 years caused widespread death and destruction.
“This time it is a pandemic to blame, when it was then a Great Prince who saw ice in the North Sea, and the War of the Spanish Succession … which did the damage,” Societe Generale strategist Kit Juckes wrote in a research note on Friday.
According to the Office for National Statistics, there were some signs of improvement in the closing months of 2020, with GDP estimated to increase by 1% in the fourth quarter, after record growth in the third quarter.
But there were big fluctuations in production between October and December,largely follow the level of restrictions imposed to control the coronavirus.
The UK suffered one of the worstrecessions undermajor economies last year. For example, Germany held up better during the pandemic than during the global financial crisis. Preliminary estimates suggest that Europe’s largest economy shrank by 5% last year. Meanwhile, according to Eurostat, the EU’s GDP will have contracted by 6.4%.
The United States did even better in comparison, with GDP down 3.5% from the previous year.
“Today’s figures show that the economy has been in a serious shock as a result of the pandemic, which has been felt by countries around the world,” UK Treasury Secretary Rishi Sunak said in a statement. “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.”
The new national lockdown in the UK, imposed on January 5, is expected to hit the economy hard in the first quarter of 2021, reversing the return to growth in the fourth quarter of 2020.
“Looks like it’s a double dip[recession] was delayed rather than outright avoided, ”said Sam Miley, an economist at the London-based Center for Economics and Business Research in a note on Friday.
The disruption in trade between the EU and the UK after the end of the Brexit transition period on December 31 is also weighing on activity.
British exporters are struggling to get their products into Europe due to border delays and breakdowns in new customs systems. Companies that sell fresh products, such as live shellfish and meat, have had to throw away their products in some cases. Even once the dust settles, new trade arrangements are expected to generate additional costs for UK businesses, which depend for much of their imports and exports from Europe.
The pandemic has left more than a quarter of UK adults financially vulnerable, with too much debt or too little savings to face a ‘negative life event’ such as layoff, loss of work hours or ill health, according to a study that is published on Thursday by the Financial Conduct Authority (FCA).
The survey also found that nearly 40% of UK adults were suffering financially as a result of the pandemic, with younger workers, black people and the self-employed the hardest hit.
But half of the adults in the FCA survey said the pandemic had not disrupted their finances, while about 15% of adults were better off financially. According to Bank of England chief economist Andy Haldane, that could lay the groundwork for an savings-led question, which pointed to high savings rates among British households in an opinion piece published Thursday in The Daily Mail.
“The rapid roll-out of the vaccination program in the UK means that a decisive angle has been turned in the fight against Covid,” he said. “For the economy, too, a decisive corner is about to be turned, with vast amounts of pent-up financial energy waiting to be released, like a spiral spring,” he added.
