The UK financial system contracted 9.9% in 2020, the most important decline in historical past
A man wearing a mask as a preventive measure against the spread of Covid-19 goes for a walk in London.
May James | SOPA pictures | LightRocket via Getty Images
LONDON – The UK economy contracted 9.9% in 2020, its largest annual contraction on record, when the coronavirus pandemic devastated economic activity.
In the final quarter of the year, gross domestic product (GDP) rose 1%, according to the Bureau of National Statistics, as the country reintroduced nationwide lockdown measures to combat the resurgence of Covid-19 cases.
The annual decline of 9.9% is more than twice as high as in 2009 after the global financial crisis.
Economists surveyed by Refinitiv had expected an 8% annual decline in 2020, with an expansion of 0.5% in the fourth quarter. This follows a revised recovery of 16.1% in the third quarter as social, travel and business restrictions were relaxed.
According to data from Johns Hopkins University, the UK registered more than 4 million cases of Covid-19 and 115,000 deaths as of Friday morning. The UK has been hit by new and more transmissible variants of the virus in recent months.
Hitesh Patel, portfolio manager at Quilter Investors, said the UK had seen an “annus horribilis” in the form of the “trifecta” of a public health crisis, economic deadlock and uncertainty surrounding Brexit.
“However, 2020 is in the past and the UK looks set to have a promising second half of the year given the success of the vaccine launch,” he said.
“This could easily be derailed if one of the mutations prevented the vaccines from working properly. However, a double-immersion recession has now been avoided and soon lockdowns could potentially be a thing of the past.”
England remains under a nationwide lockdown with no clear end date, despite UK Prime Minister Boris Johnson confirming on Wednesday that roughly one in four adults, roughly 13 million people, have now received their first dose of a Covid vaccine.
Monthly GDP rose by 1.2% in December compared to the previous month, but remained 6.3% below the level of February 2020. The GDP of the fourth quarter remained 6.6% below the level of the fourth quarter of 2019.
The service sector grew 1.7% in December after shrinking 3.1% in November, while manufacturing saw its eighth consecutive month of growth, albeit the smallest increase since May 2020, according to the ONS.
“The tighter restrictions imposed late last year, which are expected to remain in place for much of the current quarter, suggest the economy may contract again,” said Dean Turner, economist at UBS Global Wealth Management.
“However, the data shows that businesses and households are resilient and adaptable, so any contraction will be small. If restrictions are relaxed, we expect the economy to continue to recover strongly.”