The United Kingdom’s economy declined by less than feared in January as the country went back into a COVID-19 lockdown. However, trade with the European Union took a hard hit at the start of the post-Brexit trading relationship. Economists had expected a reduction of 4.9%.
The country’s economy is likely to decline by 4% in the first quarter of the year. This is due to the latest lockdown and disruption caused by new, post-Brexit rules for trade with the European Union.
According to the Office for National Statistics, the Gross domestic product in January was 2.9% lower than in December.
An economist with Pantheon Macroeconomics, Samuel Tombs, announced that Friday’s data and other more recent indicators suggested the economy might fall by a less severe 2% in the first quarter.
The BoE predicts that the United Kingdom’s vaccination program will trigger a bounce-back in the economy in the following months.
The ONS data revealed exports and imports from Britain to the EU plunged by the most on record.
Exports of goods to the European Union, excluding non-monetary gold and other precious metals, dropped by 40.7%. Meanwhile, imports dipped by 28.8%.
Moreover, the ONS announced the overall GDP figures were hit hard by the impact of social distancing rules on Britain’s huge services sector.
the economy was 9.2% smaller than in January 2020
According to an ONS statistician, Jonathan Athow, the economy was hardly affected in January, albeit smaller than some expected, with retail, restaurants, schools, and hairdressers all affected by the latest lockdown.
He added that manufacturing also witnessed its first drop since April, with car manufacturing dipping significantly. Still, increases in health services from both vaccine rollout and expanded testing partially balance the declines in other industries.
The United Kingdom’s economy dropped by 1.7% in the three months to January. This is a smaller decline than a median forecast of a contraction of 2.5%.
Data revealed that the economy was 9.2% smaller than in January 2020.
The United Kingdom’s Prime Minister Boris Johnson plans to ease England’s COVID-19 restrictions before lifting most of them by late June.
Growth in the next few months is also likely to get support from finance minister Rishi Sunak’s announcement last week. He said that he would pump a further 65 billion pounds into the economy, including an extension of his jobs-protecting furlough scheme.
The ONS announced Britain’s dominant services sector decreased by 3.5% in January from December. Meanwhile, manufacturing declined by 2.3%, but construction output grew by 0.9%.