Data released over the weekend by the Office for National Statistics revealed that the UK economy shrank by almost 10% in 2020, more than twice as much as the previous record annual fall.
As expected due to the restrictions placed on businesses for ¾ of the year where many businesses have been forced to close. There is positive news however as the economy bounced back from a 2.3% fall in November with growth of 1.2% in December, after some restrictions were eased.
It was expected that the economy would stabilise during the last quarter of the year but the overall 2020 statistics provide a scale of how hard the economy was hit over the whole of last year.
The full picture is yet to be seen as January saw the introduction of the 3rd national lockdown as well as some impact coming from the end of the transition period, it is likely that the economy will take a further hit from January.
Commenting on the latest GDP figures published today by the ONS, BCC Head of Economics, Suren Thiru, said: “The UK economy recorded stronger than expected growth in the final quarter of 2020 as the squeeze on output from the November lockdown was more than offset by a temporary boost from the release of pent-up demand from the subsequent easing in restrictions, increased activity from the coronavirus testing schemes and Brexit stockpiling.
“Modest growth at the end of 2020 is set to be followed by a substantial fall in output in the first quarter of this year as the current lockdown, the unwinding of Brexit inventories and disruption to UK-EU trade flows combine to suffocate activity.
“While the vaccine rollout offers optimism, with the scarring caused by the pandemic likely to crystallise as government support winds down and the prospect of persistent post-Brexit disruption, any recovery may be slower than the Bank of England currently predicts.
“The current drip-feed approach to support measures means firms cannot plan for more than a few weeks ahead. It is critical that the government swiftly implements a package of measures that support businesses and the economy for the whole of 2021, including removing the cliff-edges for business rate reliefs, VAT deferrals and furlough.”
Sharon Smith, CEO of The Herefordshire & Worcestershire Chamber of Commerce, said: “This data will certainly not come as a surprise for many, it shows a clearer picture of what exactly businesses have been suffering from for the majority of last year.
“With government support winding down in the coming months businesses do not have the confidence to plan after April, Government should be looking to identify a roadmap out of lockdown which includes comprehensive long-term financial support for businesses which installs confidence and solves cash flow issues that businesses have.”
How has the first few months been for your business? The Chamber’s Quarterly Economic Survey data collection is now open and we are looking for businesses to tell us how your businesses has been impacted. The results of the survey will then be transformed into the Q1 2021 Economic Indicator Report. This feedback will help government put measures in place to help support businesses and help the economy bounce back quicker when it is able to do so.
To take part in this quarter’s survey and get your key concerns heard please visit here.