A UK economy fell 9.9% in 2020, which is the sharpest contraction on record in over 300 years – since the estimated crash of the country’s economy since the “Great Famine of 1709”. Despite this historic contraction, the UK economy has reached a positive quarterly growth in the fourth quarter, thus avoiding meeting the definition of what would be a technical recession (two consecutive quarters of negative growth rate in the chain). The outlook for 2021 is much better.
“The figures released show that the economy has suffered a severe shock as a result of the pandemic, just as it has happened in countries around the world,” said Rishi Sunak, UK Minister of Finance who will present on March 3 the annual budget. The UK economy shrank more than others in Europe, however Portugal – Spain’s 7.6% fell even more: 11%.
However, between October and December, the UK economy grew 1% despite all the containment measures associated with the second wave. It was, after all, an encouraging performance – which exceeded the expectations of the most optimistic economists – and which generates good expectations for a possible recovery soon: “As the restrictions are lifted, we expect the economy to recover vigorously“Said Dean Turner, economist at UBS Global Wealth Management, quoted by Reuters.
The fact that the UK is further along in the vaccination process than EU countries justifies some of the optimism among economists that the UK economy may start to recover faster than others. Data released this Friday by the official statistics office shows a 1.2% increase in economic product only in December, after the 2.3% drop in the previous month (November) – this would have been the result of purchases of holidays and a relaxation of restrictions decided for Christmas.
Even so, the forecast of Staff economists from the Bank of England is that the economy will shrink by 4% in the first three months of this new year, due to new pandemic restrictions and also some disruption related to the process of withdrawal from the European Union.