The UK economy grew more than expected in the fourth quarter despite extensive Covid-19 restrictions, but the outlook for the start of 2021 has darkened.
Output expanded 1 per cent in the three months to December compared with the previous quarter, data from the Office for National Statistics showed on Friday. That was stronger than the 0.5 per cent forecast by economists polled by Reuters.
UK output was down 7.8 per cent compared with the final quarter of 2019, nearly twice the decline in Germany and about three times the drop in the US, reflecting long periods of strict restrictions in the UK.
In 2020, UK output fell 9.9 per cent, the fastest pace in 300 years and more than twice the drop during the financial crisis, laying bare the full scale of the impact of the pandemic.
Rishi Sunak, chancellor of the exchequer, said: “Today’s figures show that the economy has experienced a serious shock as a result of the pandemic, which has been felt by countries around the world.”
“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,” he added.
The Bank of England expects the economy to contract sharply in the first quarter because of the latest national lockdown. But the UK has been swift with its vaccine campaign, raising hopes of an economic recovery from the spring.
“We look for a hefty 6 per cent quarter-on-quarter rebound in GDP in the second quarter, followed by a 2.2 per cent increase in the third,” said Samuel Tombs, chief UK economist at Pantheon Macroeconomics. That could mean a faster recovery than in other European countries, where the vaccine rollout has been much slower, he added.
In December, the economy expanded 1.2 per cent compared with the previous month, reflecting a partial reopening after the lockdown in November.
“Loosening of restrictions in many parts of the UK saw elements of the economy recover some lost ground in December,” said Jonathan Athow, deputy national statistician for economic statistics, “with hospitality, car sales and hairdressers all seeing growth.”
An increase in Covid-19 testing and tracing also boosted output, he added.
The services sector staged the strongest rebound, rising 1.7 per cent in December compared with the previous month as the reopening of client-facing services such as non-essential stores, bars and restaurants boosted sales.
Growth in manufacturing was slower than in the services sector but followed seven months of uninterrupted expansion. In contrast, output in the construction sector fell for the first time since the spring.