Experts have said that the 9.9% slowdown in the UK economy last year is likely to be the worst among major economies in 2020, but are still hopeful of a bounceback this spring.
Growth dropped from more than 16% in the third quarter of the year, when the economy bounced back during the late summer, to 1% in the final quarter, the Office for National Statistics revealed on Friday.
Kemar Whyte, senior economist at the National Institute of Economic and Social Research, said: “According to today’s ONS figures, UK GDP contracted by 9.9% in 2020, which is likely to be the largest annual fall among G7 countries last year.
“As a result, the level of GDP in the UK remained about 8% below pre-pandemic levels, even before a third lockdown became necessary in January 2021.
“With Covid-19 restrictions expected to remain elevated until early spring, we anticipate a sharp decline in activity during the first quarter of the year.
“Nevertheless, growth will pick up from the second quarter onwards as restrictions ease on the back of a successful vaccination programme.”
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Handelsbanken’s UK chief economist, James Sproule, said that while the UK’s GDP may look worse than other major economies, it also measures the figure slightly differently.
“If schoolchildren are not being taught, measured output falls even if teachers are still being employed,” he said.
“This approach resulted in UK GDP figures falling more sharply than others in the pandemic, but equally the restarting of schools will boost output figures in the recovery.”
After the figures were released, Chancellor Rishi Sunak promised that he would lay out a plan for jobs in his forthcoming Budget.
Trades Union Congress general secretary Frances O’Grady called for the furlough scheme, which has supported around 10 million jobs through the pandemic, to be extended past April, when it is set to end.
“Millions of people’s jobs hang in the balance,” she said. “It’s time to end the uncertainty and anxiety. The Chancellor must urgently extend full furlough support to the end of the year to keep jobs safe.
“And he must cancel the pay freeze that is due to hit millions of key workers in April. The last thing our businesses and high streets need is to have consumer spending held down when they are trying to recover.”
ING developed markets economist James Smith said the economy is likely to have shrunk by 4% in January.
“The obvious wildcard here is Brexit, and we think it’s inevitable that we’ll see a fall in manufacturing production at the start of the year – the main question is by how much,” he said.
“Firms have struggled under the weight of new paperwork and processes, and all the evidence suggests supply chains have faltered as a result.”