UK hurtling towards fresh recession after 'alarming' GDP figures

Britain is heading for a double-dip recession after official figures showed that output tumbled in November amid lockdowns and restrictions on both sides of the Border.

Output from the construction sector was one of the few bright spots in the latest GDP data as the crucial services sector suffered a slump. Picture: Jane Barlow/PA Wire

The Office for National Statistics (ONS) said UK gross domestic product (GDP) fell by 2.6 per cent month-on-month in November.

GDP at the end of the month was 8.5 per cent below its pre-pandemic peak but is expected to fall further after a national lockdown took hold this month.

November’s decline came after six consecutive months of growth, with a 0.6 per cent improvement in October.

Economists had warned that the UK is set to see a double-dip recession if restrictions remain in place in the first three months of 2021.

Darren Morgan, director for economic statistics at the ONS, said: “The economy took a hit from restrictions put in place to contain the pandemic during November, with pubs and hairdressers seeing the biggest impact.

“However, many businesses adjusted to the new working conditions during the pandemic, such as widespread use of click and collect as well as the move online.

“Manufacturing and construction generally continued to operate, while schools also stayed open, meaning the impact on the economy was significantly smaller in November than during the first lockdown.”

James Smith, research director of the Resolution Foundation, said: “The sharp GDP fall in November as England entered its second national lockdown suggests that the UK is in the midst of a double-dip recession as it starts the year with even stricter restrictions.

“But while the economic story today is of only the second-ever double-dip recession on record, the story of the year will be a vaccine-driven bounce back in economic activity for sectors like hospitality and leisure. The Chancellor must do everything he can to support that recovery once public health restrictions ease.”

Ed Monk, associate director, personal investing at Fidelity International, said: “November saw an abrupt end to six consecutive months of growth with GDP dropping sharply, down 2.6 per cent.

“With all non-essential retailers, restaurants and bars closed [in England] the dominant services sector was again badly disrupted, with production only marginally lower and construction still growing.

“GDP gains from Q3 were reversed and, with December also affected by lockdown and a partially cancelled Christmas, the final quarter of 2020 now looks likely to produce negative growth.

“That raises the likelihood that the UK will be back in recession during the first quarter of 2021.”

He added: “The economic recovery will be a bumpy ride from here on out, particularly as it is unclear how quickly vaccinations can translate into a loosening of lockdown restrictions.

“There is evidence from last year’s numbers, however, those periods of recovery when they do arrive are rapid and stronger than forecast.”

Ulas Akincilar, head of trading at the online trading platform Infinox, added: “At around 80 per cent of the UK economy, services have the power to make or break the recovery.

“With manufacturing barely in negative territory and construction output still expanding in November, the across-the-board collapse in services activity is the single biggest warning light in this alarming set of data.”

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