The United Kingdom economy shrank by 9.9% in 2020 — the U.K’s worst annual slump since the Great Frost of 1709. The economic contraction followed the Covid-19 pandemic and worsened with the discovery of the new corona-virus variant in November.
In 2009, the United Kingdom suffered a similar slump because of the global financial crisis. However, this year’s contraction is as twice as that of 2009. In fact, it’s even worse than the 9.7% slump in 1921.
Small Strides Amid United Kingdom’s GOP Slump
According to a report by the Office for National Statistics, the United Kingdom’s gross domestic product grew by 1% following the country’s imposition of the nationwide lockdown measures.
Meanwhile, the monthly GDP increased 1.2% in December compared to the preceding month. Regardless, levels have not increased enough to combat the lows of 6.3% in February 2020. Additionally, the fourth-quarter GDP stabilized at 6.6% below the level of the previous year.
The services sector saw a 1.7% jump in December, compared to a 3.1% contraction earlier in November. On the other hand, manufacturing marked its eighth consecutive month of growth. Nevertheless, manufacturing growth continues compared to May 2020.
David Madden of CMC Markets commented on the slump saying:
“The preliminary reading of fourth-quarter GDP will be published at 7 am (U.K. time), economists are expecting to see 0.5% on a quarterly basis, which would be a big fall from the 16% growth registered in the third quarter.”
“Services account for approximately 70% of the UK’s economic output. The services PMI levels in October, November, and December were 51.4, 47.6, and 49.4 respectively. A reading below 50.0 means negative growth. Clearly, tougher restrictions introduced from November onwards dented the all-important industry. Given the uncertainty that existed in relation to the U.K-EU trading relationship at the back end of 2020, there could have been stockpiling of goods.” He added.
United Kingdom restrictions have no end date
As of this writing, the United Kingdom recorded over 4 million corona-virus cases, while the death toll surpassed 115,000. According to Johns Hopkins University, the country’s high contaminations and deaths are caused by the more contagious virus variant.
Consequently, England re-imposed stricter lockdown and the country’s officials said that they won’t be lifting the nationwide lockdown anytime soon. Meanwhile, British Prime Minister Boris Johnson said Wednesday that 1 in 4 adults have received their first dose of the Covid vaccine — making it 13 million vaccinated adults.
“The tighter restrictions imposed towards the end of last year, which are likely to remain in place for much of the current quarter, suggest that the economy may shrink again,” said Dean Turner, economist at UBS Global Wealth Management.
“However, what is clear from the data is the resilience and adaptability of firms and households, so any contraction will be modest. As and when restrictions are eased, we continue to expect a vigorous rebound in the economy.” He added.