'Little to cheer' as economy shrinks dramatically during 2020

The UK may be set to avoid the dreaded 'double-dip' recession, but there is "little to cheer", according to local business leaders, in the latest data which reveals the economy shrank at its fastest rates since the 1920s.

The Office for National Statistics has revealed gross domestic product (GDP) dropped by a record 9.9% last year.

GDP for 2020 was down a record 9.9% - but December showed signs of improvement
GDP for 2020 was down a record 9.9% - but December showed signs of improvement

GDP measures the value of all goods and services produced.

Unsurprisingly, it fell dramatically in 2020 as a result of the health crisis.

However, in December the economy did show some signs of growth following November's 2.3% drop, rising by 1.3%.

If that continues, the double-dip recession - where the economy slips and recovers, only to slump once again - could be avoided. A recession is determined by two successful quarters of a drop in GDP.

Commenting on the latest figures, Jo James, chief executive of the Kent Invicta Chamber of Commerce, said: "The UK economy recorded stronger than expected growth in the final quarter of 2020 as the squeeze on output from the November lockdown was more than offset by a temporary boost from the release of pent-up demand from the subsequent easing in restrictions, increased activity from the coronavirus testing schemes and Brexit stockpiling.

Jo James CEO of Kent Invicta Chamber of Commerce
Jo James CEO of Kent Invicta Chamber of Commerce

“Despite avoiding a double-dip recession, with output still well below pre-pandemic levels amid confirmation that 2020 was a historically bleak year for the UK economy, there is little to cheer in the latest data.

“Modest growth at the end of 2020 is set to be followed by a substantial fall in output in the first quarter of this year as the current lockdown, the unwinding of Brexit inventories and disruption to UK-EU trade flows combine to suffocate activity.

“While the vaccine roll-out offers optimism, with the scarring caused by the pandemic likely to crystallise as government support winds down and the prospect of persistent post-Brexit disruption, any recovery may be slower than the Bank of England currently predicts.

“The current drip-feed approach to support measures means firms cannot plan for more than a few weeks ahead. It is critical that the government swiftly implements a package of measures that support businesses and the economy for the whole of 2021, including removing the cliff-edges for business rate reliefs, VAT deferrals and furlough.”

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