industry

Economy worst since 1709’s big freeze


The economy shrank by a record 9.9 per cent in 2020, official figures show. The recovery slowed markedly in the final three months of 2020 as coronavirus restrictions were tightened to deal with a second wave of cases.

Output expanded 1 per cent between October and December, following 16.1 per cent growth in the previous three months, the Office for National Statistics reports.

Each of the broad sectors of the economy grew in the final quarter of 2020, as services rose 0.6 per cent, production 1.8 per cent and construction 4.6 per cent. Overall, the expansion was twice as large as forecast.

However, it was not enough to make up for a record plunge in Gross Domestic Product during the first lockdown earlier in the year. The overall decline in output last year was more than twice as deep as in 2009 when the global financial crisis caused GDP to fall 4.1 per cent.

The third round of national lockdowns in the opening months of 2021 is expected to cause the economy to shrink further. Card spending was down in January and businesses reported weaker turnover.

The Bank of England forecasts a rapid rebound in the spring as more people are vaccinated and restrictions are lifted.

“However, GDP for the year fell by nearly 10 per cent, more than twice as much as the previous largest annual fall on record.”

Last year’s fall was the biggest since statisticians began calculating GDP in the 1940s. The last fall in output of comparable scale was in 1921 as the nation dealt with the aftermath of the First World War.

The economy is estimated to have shrunk 9.7 per cent that year, although GDP data was not collected in the way it is today.

Taking into account all available figures, 2020 was the worst year for the economy since harvests failed after the Great Frost of 1709.

Bank of England deputy governor Andy Haldane attempted to puncture the gloom with an upbeat assessment yesterday.

He described the economy as like a “coiled spring”, ready to release pent-up energy once confidence is restored.

Mr Haldane said in the Daily Mail: “With 13 million of the most vulnerable people already vaccinated, the risk of death or hospitalisation in the UK has already probably halved.

“By the end of March, based on the current pace of vaccine rollout and government data on vulnerable groups, this risk may have been reduced by as much as three-quarters and by the end of the second quarter it will be even smaller.”

Jonathan Gillham, PwC chief economist, warned that, despite the better-than-expected figures for the end of last year, there was still “much to do” to get the economy back on track.

He said: “Key sectors such as retail and accommodation are still struggling significantly and this is having a serious impact on employees and business owners.”

The detailed figures underlined how uneven the pandemic’s impact has been. In December, 44 manufacturing industries surpassed their pre-Covid production levels. Over the same period, output in accommodation and food services – which includes hotels, restaurants and caterers – was down 55.6 per cent.

That gives Rishi Sunak, the chancellor, a difficult task as he prepares for the Budget on 3 March as support measures such as the furlough scheme and business rates holiday are set to end in April.

(Statista)

The chancellor said the economy had experienced a “serious shock” and lockdown measures continued to have a serious impact on people and businesses.

Mr Sunak added: “That’s why my focus remains fixed on doing everything we can to protect jobs, businesses and livelihoods.

“At the Budget I will set out the next stage of our plan for jobs, and the support we’ll provide through the next phase of pandemic.”

Labour’s shadow chancellor, Annelise Dodds, called on the government to act now rather than waiting until next month.

Ms Dodds said: “Businesses can’t wait any longer. We need a smarter furlough scheme that offers certainty beyond April, alongside an extension to the business rates holiday and the vital VAT reduction for hospitality and tourism to give businesses breathing space.

“This crisis has pulled back the curtain on the Conservatives’ insecure economy. We need to rebuild stronger, putting in place the foundations for a better, more secure future.”

Separate data showed that the trade deficit (exports minus imports) increased, partly due to imports of vaccine from Belgium, home to Pfizer’s main Covid-19 vaccine factory.

Britain received 22 deliveries of the Pfizer and BioNTech vaccine by 25 December.

Manufacturers also increased imports of components prior to 31 December, the end of the Brexit transition period.

Total imports increased by £11.6bn, while exports increased by £0.7billion.

Trades Union Congress general secretary Frances O’Grady called for the furlough scheme, which has supported about 10 million jobs through the pandemic, to be extended.

She said: “Millions of people’s jobs hang in the balance. It’s time to end the uncertainty and anxiety. The chancellor must urgently extend full furlough support to the end of the year to keep jobs safe.

“And he must cancel the pay freeze that is due to hit millions of key workers in April. The last thing our businesses and high streets need is to have consumer spending held down when they are trying to recover.”



READ SOURCE

Leave a Reply

This website uses cookies. By continuing to use this site, you accept our use of cookies.