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Summary
- The UK might be heading for a double dip recession, say experts
- ONS said the GDP was 8.5 per cent below the pre-pandemic peak in February 2020
- The services sector shrunk by 3.4 per cent for November while industrial production dropped by 0.1 per cent
The gross domestic product of Britain fell by 2.6 per cent for November last year, according to latest data from the Office of National Statistics. This is the first step towards a double dip recession for the UK economy. The month’s contraction coincided with imposition of the second lockdown across the nation in England along with stricter controls across Wales, Northern Ireland, and Scotland. However, the market experts had forecasted a steeper fall of 5.7 per cent for the month.
From May to October 2020, the monthly economic growth rates in the nation had displayed positive figures, when the economy seemed to be recovering from the first wave of the pandemic. However, the renewed set of restrictions took a toll on the November GDP, which was 8.5 per cent lower than the pre-pandemic level.
(Image source: ©Kalkine Group 2020)
November’s fall was the third steepest after April and May for the last year, when the GDP shrank by 18.8 per cent and 7.3 per cent respectively.
The only solace was that the effect of the second lockdown was much lesser than that of the first one which was imposed during the last spring. The reasons were that some of the businesses were able to Covid-proof their operations, while opening up of schools, and sectors like manufacturing and construction also seems to have helped, noted the experts.
Fear of a double-dip recession
The UK economy shrank by 3 per cent during the first quarter and by a hefty 19 per cent during the second quarter of 2020, thereby officially entering an economic recession. By definition, when an economy shows negative growth rates for two consecutive quarters, it enters a recession. Later, growth returned in the third quarter with a 16 per cent rise.
As November’s numbers will be a part of the final quarter, and if overall impact of the restrictions till December is taken into account, the Q4 GDP could decline, according to economic experts. And in case the tighter set of rules continue through Q1 2021 as well, the economic output could shrink even further. Such a scenario could put the nation back into yet another recession, lament the experts. This type of a situation is defined as a double-dip recession, when an economy enters recession twice within a short span of time.
James Sproule, UK chief economist at Handelsbanken, the Sweden’s bank has forecasted the British GDP to keep falling for at least through December 2020 and January 2021, before any upward movement can be seen.
Nonetheless, with the vaccine rollout gathering momentum, the later part of the year could display decent growth numbers.
Numbers varied across sectors
The ONS figures have estimated that hairdressers and pubs suffered the largest setback during November as these outlets were mainly closed during the period while some of the hospitality outlets could operate merely on a takeaway basis.
The services sector as a whole was negatively impacted, shrinking by 3.4 per cent for the month. The sector, which is otherwise an engine of growth for the British economy, includes activities like banking & finance, retail, and hospitality.
Industrial production plummeted by a marginal 0.1 per cent for the month, as most of the manufacturing operations were allowed to function. The construction sector grew by 1.9 per cent, with building sites remaining open for November.
