UK GDP fell 2.6% in November as economy hit by second Covid lockdown

Rishi Sunak today warned things will ‘get harder before they get better’ as figures showed the UK is on track for another recession, with GDP tumbling by 2.6 per cent amid the second Covid lockdown in November.

Restrictions in force in all four UK nations sparked another slump in activity after six months of improvement following the emergence of the disease. 

The impact was far more limited than many analysts feared as firms managed to find ways of working around the curbs. But it means the economy was still 8.5 per cent smaller in November than in February. 

Business groups warned that any December rally will have been smothered by the harsh ‘tier’ controls in England, and a double-dip recession now looks ‘inevitable’ with the new even tougher draconian to tackle mutant Covid.

Mr Sunak said it was ‘clear things will get harder before they get better and today’s figures highlight the scale of the challenge we face’.

However, he said the vaccine drive offered hope for recovery, and the Treasury was ready to support people hit by the crisis. 

‘With this support, and the resilience and enterprise of the British people, we will get through this,’ he said. 

ONS Director for Economic Statistics Darren Morgan 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.

‘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.’

Despite the more resilient than expected numbers – particularly in construction and manufacturing – economists warned of a looming double-dip recession, after historic downturn last year.

EY’s Howard Archer said: ‘With lockdowns across the UK back in place and set to last until at least mid-February… the economy will have a challenging start to 2021 and will experience clear contraction in the first quarter.

‘The forecast is for a first quarter decline in GDP in the region of 3.0-4.0 per cent quarter-on-quarter. This would result in a double dip recession.’

British Chambers of Commerce head of economics Suren Thiru said the latest figures ‘highlight the continued damage being done to the UK economy’.

‘The decline in output in November was largely driven by the drag on activity from the second lockdown, with consumer-focused services firms, who are most exposed to lockdown restrictions, enduring a particularly difficult month,’ he said.

‘With any post-lockdown rally in output in December constrained by the tougher tiered restrictions, including the introduction of tier 4 measures, the UK economy is likely to have contracted in the final quarter of 2020.

‘A third lockdown means that a double-dip recession in the first quarter of this year may be inevitable, particularly if the current post-Brexit disruption persists through the quarter.

Shadow chancellor Anneliese Dodds said: ‘The UK has already had the worst recession of any major economy and now we’re in danger of a devastating double dip. 

‘Instead of securing our economy, the Chancellor is winding down economic support and hitting families with a triple hammer blow of pay freezes, a cut to universal credit and a hike in council tax.’