Rishi Sunak sees 'signs of resilience' as UK economy suffers biggest drop since 1709

UK Chancellor of the Exchequer Rishi Sunak on Friday pointed to signs of resilience and indicated further support measures in his Budget statement next month as latest statistics showed the British economy, devastated by the coronavirus pandemic, suffered its biggest decline in more than 300 years in 2020.

As most businesses, shops and restaurants continue to struggle through the coronavirus-induced lockdown, the UK Office for National Statistics (ONS) found that the economy shrank 9.9 per cent last year, more than twice the figure for 2009 at the height of the global financial crisis.

All four economic sectors tracked by the ONS saw a drop in output, with the highest fall coming in the construction sector, which contracted by 12.5 per cent.

Hospitality, car sales and hairdressers recovered some lost ground, the ONS said.

The contraction in 2020 is the worst in modern records, with Gross Domestic Product first measured in the aftermath of the World War II.

The record fall - which was caused by the pandemic and businesses being closed due to several lockdowns - also wiped out seven years of economic growth.

The dire figures are the worst since 1709, when a cold spell known as the 'Great Frost' devastated what was then a largely agricultural economy in Britain.

“While there are some positive signs of the economy's resilience over the winter, we know that the current lockdown continues to have a significant impact on many people and businesses,” said Sunak, in response to the figures.

“Today's figures show that the economy has experienced a serious shock as a result of the pandemic, which has been felt by countries around the world,” said the senior Cabinet Minister, who promised new plans to protect jobs and bolster the economy when he delivers his Budget statement in the House of Commons on March 3.

The ONS figures showed a fightback from the record quarterly slump between April and June 2020, the second quarter, when GDP nosedived by 20 per cent as a consequence of the initial lockdown.

They also confirmed the prospect of a so-called double-dip recession was averted at the end of the year amid renewed lockdown conditions, with a first estimate for the October-December quarter showing growth of 1 per cent -- a better than expected performance.

"Loosening of restrictions in many parts of the UK saw elements of the economy recover some lost ground in December, with hospitality, car sales and hairdressers all seeing growth,” said Jonathan Athow, ONS deputy national statistician for economic statistics.

“An increase in COVID-19 testing and tracing also boosted output. The economy continued to grow in the fourth quarter as a whole, despite the additional restrictions in November. However, GDP for the year fell by nearly 10 per cent, more than twice as much as the previous largest annual fall on record,” he said.

According to Bank of England historical data, it marked the worst performance for the economy since the 'Great Frost' hibernation of 1709 when a horrifically cold European winter, followed by widespread floods, crippled activity.

Suren Thiru, the head of economics at the British Chambers of Commerce, said: "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." Shadow chancellor Anneliese Dodds said: "These figures confirm that not only has the UK had the worst death toll in Europe, we're experiencing the worst economic crisis of any major economy.

"Businesses can't wait any longer. The chancellor needs to come forward now with a plan to secure the economy in the months ahead, with support going hand-in-hand with health restrictions." However, Sunak said international economic comparisons were not necessarily a useful yardstick.

"We calculate GDP in a different way to pretty much everybody else. And if you either correct for that difference or look at it in a way that's more comfortable with nominal GDP, what you find, as the Bank of England and the ONS have pointed out, is that our performance is very much in line and comparable to other countries." The pandemic has left more than a quarter of British adults financially vulnerable, with too much debt or not enough savings to cope with a "negative life event" such as redundancy, loss of working hours, or ill health, according to a survey published on Thursday by the Financial Conduct Authority (FCA).

The survey also found that nearly 40 per cent of British adults suffered financially as a consequence of the pandemic, with younger workers, Black people and the self-employed among the hardest hit.

The UK remains under tight lockdown restrictions with pubs, restaurants and non-essential businesses shut and holidays banned.

The country has reported over 4,010,000 confirmed COVID-19 cases and more than 115,000 deaths. 

(Image credit: AP)