Tuesday, September 26, 2023

Round two: UK could fall back into recession as new lockdowns bite | Business and economic news

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With new lockdowns and a variant of COVID-19, the UK is increasingly likely to fall back into recession.

Britain’s economy looks set to fall back into recession after official figures on Friday showed it shrank 2.6% per month in November, as much of the country was in a second lockdown of the coronavirus.

The Office for National Statistics (ONS) said that following the fall, the economy is 8.5% smaller than its peak before the pandemic. When the pandemic struck last spring, the economy contracted by up to a fifth in the first half of the year, before a summer easing of restrictions allowed it to recoup some of those losses .

Due to the fall in November, the economy is expected to contract again in the fourth quarter.

With most of the UK in an even tighter lockdown in early 2021 following a spike in new cases blamed on a new variant of the virus in London and south-east England, it appears inevitable that the economy will contract further in the first quarter of the year. This means that it will have contracted for two consecutive quarters, the technical definition of a recession.

“It is clear that things will get harder before they get better and today’s figures highlight the scale of the challenge we face,” said UK Treasury Chief Rishi Sunak.

November’s drop was not as severe as some economists feared, indicating that companies have been successful in finding ways to sell their products even when their doors are closed through online services.

The service sector was hit hard in November, declining 3.4% as rafts of hospitality and leisure businesses had to close. The sector is now 9.9% smaller than it was in February 2020, before the impact of the pandemic was felt in full.

“The economy has been hit by restrictions put in place to contain the pandemic in November, with pubs and hairdressers seeing the biggest impact,” said Darren Morgan, director of economic statistics at the ONS. “However, many companies have adapted to the new working conditions during the pandemic.”

The hope is that the rollout of coronavirus vaccines – the UK is ahead of many other countries – will see activity pick up again later this year.

“While current economic history is only the second double-dip recession on record, this year’s history will be a rebound in vaccine-related economic activity for sectors such as hospitality and leisure.” , said James Smith, head of research. director of the Resolution Foundation.


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