UK’s economy suffers biggest drop since 1709

London, Feb 13: The British economy suffered its biggest decline in more than 300 years in 2020 as the coronavirus pandemic closed shops and restaurants, devastated the travel industry and curtailed manufacturing.

The economy shrank 9.9 per cent last year, more than twice the figure for 2009 at the height of the global financial crisis, the Office for National Statistics said Friday. The drop is the largest since 1709, when a cold spell known as the Great Frost devastated what was then a largely agricultural economy.

The data comes as Britain’s economy remains shackled by restrictions designed to combat COVID-19. A rebound in growth during the fourth quarter has been stifled by England’s third lockdown, which has closed schools, restaurants and non-essential shops since mid-December. Tough restrictions also remain in place in Northern Ireland, Scotland and Wales.

“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,” the UK’s top treasury official, Chancellor Rishi Sunak, said in a statement.

“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.”

Sunak said he would announce new plans to protect jobs and bolster the economy when he delivers his annual budget statement to the House of Commons on March 3.

COVID-19 has hit Britain’s economy harder than most other industrialised democracies. French GDP shrank 8.3 per cent last year, Germany 5 per cent and the US 3.5 per cent.

The GDP figures show the breadth of the pandemic’s economic impact in Britain.

The service sector, which accounts for about 80 per cent of the UK economy, shrank 8.9 per cent last year, with output from accommodation, food and beverage businesses down more than 55 per cent from February levels. Manufacturing fell 8.6 per cent and construction 12.5 per cent.

In hopes of relaxing the restrictions that have devastated the economy, the UK has moved to rapidly vaccinate its most vulnerable residents. More than 13.5 million people, or about 20 per cent of the population, had received at least one dose of COVID-19 vaccine by Wednesday.

Andy Haldane, chief economist for the Bank of England, said the vaccination drive is helping Britain turn a corner in its battle against the virus. Lifting COVID-19 restrictions is likely to unleash a wave of spending by consumers and businesses that will trigger a rapid recovery later this year, he said.

“A decisive corner is about to be turned for the economy, too, with enormous amounts of pent-up financial energy waiting to be released, like a coiled spring,” Haldane wrote in the Daily Mail.

But that optimism comes against the backdrop of Europe’s deadliest coronavirus outbreak, with more than 115,000 deaths recorded so far.

“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,” said Anneliese Dodds, the opposition Labour Party’s spokesperson on economic issues.

“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.