In November Britain’s economy shrank for the first time since the initial COVID-19 lockdown last spring, hit by a tightening of social-distancing rules. The 2.6% monthly decline was much smaller than most analysts expected. Britain’s economy, which decreased more distinctly than any other major advanced economy in the first half of 2020, is now 8.5% smaller than it was before the start of the coronavirus pandemic in February.
Finance Minister Sunak said, “It’s clear things will get harder before they get better and today’s figures highlight the scale of the challenge we face.” But the rolling out of the vaccines was a reason to be hopeful, Sunak said. Many economists warned that Britain was still on course for renewed recession, with the economy likely to shrink in both the final quarter of 2020 and the first three months of 2021.
“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,” said Suren Thiru, head of economics at the British Chambers of Commerce.
The scale of the hit to the economy in November was much smaller than in the first lockdown last year. But with a third, tougher lockdown now in place, and the impact of the country’s new, less open trading relationship with the European Union also a drag on business, the country is facing major challenges in early 2021.
Andrew Bailey said this week that it was too soon to say if further stimulus would be needed after the central bank ramped up its bond-buying programme to almost 900 billion pounds in November. Friday’s data showed Britain’s economy in November was 8.9% smaller than a year earlier, a smaller drop than the 12.1% fall forecast in a Reuters poll. 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 United Kingdom.