Spherical two: UK could fall again into recession as new lockdowns chew | Enterprise and Economic system Information
With new lockdowns and a variant of COVID-19, the UK is becoming increasingly likely to slide back into recession.
The UK economy is likely to slide back into recession after Friday’s official figures showed it contracted 2.6 percent in November from the previous month as much of the country was in a second coronavirus lockdown.
The Office for National Statistics (ONS) said the economy is 8.5 percent smaller than it was before the pandemic as a result of the decline. When the pandemic broke out last spring, the economy contracted by up to a fifth in the first half of the year before recovering some of those losses after easing restrictions in the summer.
Due to the autumn in November, the economy will contract again in the fourth quarter.
With most of the UK even more tightly blocked at the beginning of 2021 after a surge in new cases attributable to a new variant of the virus in London and the south east of England, it seems inevitable that the US economy will continue will shrink in the first quarter of the year. That is, it will have completed the technical definition of a recession for two consecutive quarters.
“It is clear that things are getting harder before they get better and today’s numbers underscore the scale of the challenge we face,” said UK CFO Rishi Sunak.
The November decline wasn’t as bad as some economists feared, an indication that companies have managed to find ways to sell their goods even with their doors closed through online services.
The service sector was hit hard in November, shrinking 3.4 percent as hotel and leisure rafts shut down. The sector is now 9.9 percent smaller than it was in February 2020, before the effects of the pandemic were first fully felt.
“The economy was hit by the November pandemic containment restrictions, with pubs and hairdressers having the biggest impact,” said Darren Morgan, director of economic statistics at ONS. “However, many companies have adapted to the new working conditions during the pandemic.”
The hope is that coronavirus vaccine adoption – the UK is ahead of many other countries – will pick up speed again later this year.
“While today’s economic history is only the second double-dip recession ever recorded, the story of the year will be a vaccine-driven rebound in economic activity for sectors such as hospitality and leisure,” said James Smith, research director for the Resolution Foundation.