Economy  

UK economy shrinks by 3% during lockdown

UK economy shrinks by 3% during lockdown

The UK economy fell by 2.9 per cent in January, according to the Office for National Statistics.

The ONS said this meant the UK economy was 9 per cent smaller than it was in February 2020 - the last full month of "normal" operating conditions.

In October 2020 - which was the peak of the initial recovery - the UK economy was 4 per cent smaller than it was in February 2020.

Jonathan Athow, deputy national statistician at the ONS, said the fall was a "notable" hit which was driven by a fall in consumer-facing services - though it was smaller than some were expecting.

He said: "Manufacturing also saw its first decline since April with car manufacturing falling significantly.

"However, increases in health services from both vaccine rollout and increased testing partially offset the declines in other industries."

Athow added that imports and exports to the EU fell "markedly" in January - the first month following the end of the Brexit transition period.

Jon Hudson, UK Growth fund manager at Premier Miton Investors, said: "Considering January was spent in national lockdown, the economy held up better than feared with the construction and housing industries particularly resilient.

"The UK economy looks set for a strong bounce back once restrictions ease.”

Derrick Dunne, chief executive of Beaufort Investment, said: "Viewed against the modest growth recorded in December, January’s drop of 2.9 per cent is bleak but not surprising in light of a third national lockdown spanning most of the month.

"In a very real sense, the events of 2020 continue to haunt the economy, with GDP still 9 per cent below its pre-pandemic levels.

"But savers and investors should avoid being spooked by today’s data, resist rash decisions, and focus instead on ensuring that their plans continue to serve their long-term goals once the recovery begins."

damian.fantato@ft.com