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Small recovery at end of 2020 confirmed for UK economy

Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
·2-min read
A man walks past a shop sign saying 'back to the goodlife' in Worcester town centre, England. Photo: Nathan Stirk/Getty Images
A man walks past a shop sign saying 'back to the goodlife' in Worcester town centre, England. Photo: Nathan Stirk/Getty Images

Official statistics have confirmed the UK economy grew slightly in the final quarter of 2020.

The Office for National Statistics (ONS) on Wednesday said further analysis suggested that UK GDP grew by slightly more than expected in the final quarter of 2020. The UK economy expanded by 1.3% in the final three months of last year, the ONS said, up from an initial estimate of 1% growth.

Third quarter growth was also revised up slightly, while the ONS downgraded its estimate for the second quarter. The stats body said the economy contracted by 19.5% between April and June last year during the first national lockdown, which was worse than first forecast.

The data means the UK economy shrank by 9.8% in 2020, which was broadly unchanged from an initial estimate of a 9.9% slump. 2020 marked the worst annual GDP slump in 300 years as COVID-19 brought the country to a standstill. The economic damage felt in the UK outpaced the impact in other developed economies.

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The slump in UK GDP last year was the largest on record. Photo: ONS
The slump in UK GDP last year was the largest on record. Photo: ONS

A return to lockdown at the start of 2021 means the economy is likely to shrink again in the first quarter but economists predict a strong rebound as restrictions ease. Andrew Bailey, the governor of the Bank of England, has said the economy could return to pre-pandemic levels by the end of this year.

"The green shoots of a sustainable recovery in economic activity are starting to sprout, even though lockdown rules have not eased materially this month," Samuel Tombs, chief UK economist at Pantheon Macroeconomics and one of the best private sector forecasters, wrote in a note last week.

"We remain confident in our above- consensus forecast that GDP fell by only 1.6% quarter-on-quarter in Q1, and will jump by about 5% in Q2."

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