UK GDP surpasses expectation of 4.9% contraction
Rishi Sunak announced today that UK GDP fell by 2.9%, putting the figure down to the economic impact of the coronavirus pandemic.
“Today’s figures highlight the impact the pandemic continued to have on our economy at the start of the year as we tackled the new variant of the virus – and I know this is a cause of concern for many,” the Chancellor said.
The Office for National Statistics (ONS) said on Friday that the dip on GDP came about as a result of declines in retail sales and education as the UK aimed to halt the spread of Covid-19. The UK economy is 9% smaller than it was prior to pandemic which began over a year ago, the ONS added.
Manufacturing fell for the first time since April due to a fall in exports as the UK adapted to its new arrangements with the EU, according to the ONS.
Exports to the bloc dropped by 41% in January, as imports from the EU fell by 28.8%.
Commenting on UK GDP falling by 2.9%, Ian Warwick, managing partner at Deepbridge Capital, said:
“The numbers reflect the UK’s difficult start to the year, amidst ongoing Brexit and Covid uncertainty. However, there are now clear glimmers of light at the end of what has been a long journey. The UK has already administered more than 23 million coronavirus vaccinations and the number of daily infections is falling.”
Rupert Thompson, chief investment officer at Kingswood, drew attention to other factors at play:
“The lockdown took a smaller toll on the UK economy in January than expected with GDP falling 2.9% over the month rather than 4.9% as had been expected.”
Thompson also reflected on the longer-term impact of the UK leaving the European Union.
“However, more notable was the sharp drop in EU Trade with exports and imports down 41% and 29% respectively. Only time will tell how much of this was down to the lockdown, how much was down to Brexit and more importantly, how much of the latter just reflects teething problems and will be soon reversed.”
