The 9.9% contraction recorded in 2020 overcame the post-World War I recession and was the largest since the “Great Frost” of 1709.
The United Kingdom recorded a historic contraction of 9.9% in 2020, the year when the covid-19 pandemic began. It was the biggest drop in Gross Domestic Product (GDP) in more than 300 years. To find a retraction greater than that estimated on Friday by the British National Statistics Institute (INE), it is necessary to go back to 1709, the year of the “Great Frost”, the British press says.
The fall in the year of the “Great Confinement” (an expression coined by the IMF to talk about how countries had to deal with the spread of the new coronavirus) was the biggest since then, surpassing the 9.7% contraction of 1921, in the post-World War I (1914-1918), says the Financial Times.
Despite the negative performance for the year as a whole, the economy grew more than expected in the fourth quarter – until, in December, London had to adopt new measures to halt the escalation of the new SARS-CoV-2 variant identified in Southeast England.
The British statistical institute estimates that GDP grew 1% from October to December last year compared to the previous three months. The economy retreated 2.9% in the first quarter of 2020 compared to the last three months of 2019 and, with the escalation of the epidemiological situation, a further 19% chain fall followed from April to June. The third quarter saw a recovery, with the economy growing 16.1% over those three months of a strong contraction. And, in the last three months of 2020, there was still a new chain growth.
However, the economic performance of that same quarter continued to be negative compared to the fourth quarter of 2019. GDP in the United Kingdom is 7.8% below the level recorded at that time, says the INE.
In the fourth quarter there was an increase in services, production and construction, and a recovery in public consumption and investment by companies, even though these indicators remain below levels prior to the pandemic, says the statistical institute.
In addition to the country facing the pandemic situation like the rest of the world, the entry in 2021 marked the departure of the United Kingdom from the single market and the customs union, with the end of the transition period for the exit of the State from the European Union, from which it left to join on 31 January 2020.
Finance Minister Rishi Sunak reacted on television saying that “the economy has suffered a serious shock as a result of the pandemic, felt by countries around the world” and highlighted the country’s “resilience” in the final stretch of the year. But he acknowledged that social difficulties persist. “Many families and companies are experiencing difficulties. So we have put in place a comprehensive Employment Plan and we will present the next phase of our economic response in our budget in early March [day 3], ”he said.
"Many families & businesses are experiencing hardship. That's why we've put in place a comprehensive #PlanForJobs & we will set out the next stage of our economic response at our budget in early March"
— HM Treasury (@hmtreasury) February 12, 2021
The Bank of England predicts that household savings during the period of confinement will eventually reach the economy. According to the financial agency Bloomberg, the chief economist of the central bank, Andy Haldane, predicts that consumers will release about 250 billion pounds (285 billion euros at the current exchange rate) accumulated while the economy was stifled by the restriction measures.