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UK economy shrank by 2.6% after England put on second lockdown

Graph of shrinking UK economy
The UK economy is on track to head back into recession

The UK economy shrank by 2.6% month-on-month after England was placed in lockdown for a second time, according to official figures.

The Office for National Statistics (ONS) said UK gross domestic product at the end of November was 8.5% below its pre-pandemic peak.

It is expected to fall further after a third lockdown took hold this month, reducing economic activity and putting the nation on track to head back into recession.

The decline came after six consecutive months of growth, with a 0.6% improvement in October.

However, the impact of the restrictions under the winter lockdown was not as severe as during the Spring, as more sectors of the economy remained open.

Darren Morgan, director for economic statistics at the ONS, said: ‘The economy took a hit from restrictions put in place to contain the pandemic during November, with pubs and hairdressers seeing the biggest impact.

Graph of UK economy
GDP fell by 2.6% in November 2020 as government restrictions reduced economic activity (Picture: ONS)

‘However, many businesses adjusted to the new working conditions during the pandemic, such as widespread use of click and collect as well as the move online.

‘Manufacturing and construction generally continued to operate, while schools also stayed open, meaning the impact on the economy was significantly smaller in November than during the first lockdown.

‘Car manufacturing, bolstered by demand from abroad, housebuilding and infrastructure grew and are now all above their pre-pandemic levels.’

The latest figure was not as severe as the forecasts of analysts, who had predicted a 4.6% decline for November.

But with a new lockdown in place since January the country is still at risk of falling into a double-dip recession.

Economists had warned of this scenario if restrictions remain in place in the first three months of 2021.

The Bank of England estimates Britain’s economy shrank by just over 1% over the final three months of 2020.

A man with an umbrella walks through a near empty Piccadilly Circus in London, during England's third national lockdown to curb the spread of coronavirus. PA Photo. Picture date: Thursday January 14, 2021. Under increased measures people can no longer leave their home without a reasonable excuse and schools must shut for most pupils. See PA story HEALTH Coronavirus. Photo credit should read: Dominic Lipinski/PA Wire
The biggest impact was felt on the services sector (Picture:PA)

November’s downturn was led by the services sector, where output fell 3.4% from October as pubs, restaurants, non-essential shops and many other consumer services businesses had to shut as part of a four-week lockdown in England and similar measures in other parts of the UK.

Jeremy Thomson-Cook, chief economist at Equals Money, said: ‘The UK economy contracted in November as the country slowly slipped back into the lockdowns that have been a feature of life since then and through the Christmas period.

‘The services sector remains the hardest hit, and naturally the most valuable to the UK economy as a whole.

‘Given conditions were lighter in November – lower tiers, more businesses able to trade at some level – today’s numbers confirm that Q4 2020 will be the first quarter of the new double-dip recession.’

Get in touch with our news team by emailing us at webnews@metro.co.uk.

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