UK economy suffered record annual slump in 2020

The UK economy shrank by a record 9.9% last year as coronavirus restrictions hit output, the Office for National Statistics (ONS) says.

The contraction in 2020 "was more than twice as much as the previous largest annual fall on record," said ONS deputy national statistician Jonathan Athow.

In December, the economy grew by 1.2%, after shrinking by 2.3% in November, as some restrictions eased.

Hospitality, car sales and hairdressers recovered some lost ground.

Last month's growth means the UK economy looks set to avoid what could have been its first double-dip recession since the 1970s.

A double dip is when the economy briefly recovers from recession, only to quickly sink back. A recession is generally defined as two consecutive quarters where the economy contracts.

Mr Athow said: "An increase in Covid-19 testing and tracing also boosted output. The economy continued to grow in the fourth quarter, despite the additional [lockdown] restrictions in November."

In the October-to-December quarter, the economy grew by 1%.

GDP was first measured in the aftermath of the Second World War, and the measure has never previously dropped by more than 4.1% in a year. However, the Bank of England models GDP going back centuries, and the 2020 contraction could be the worse since 1709.

Chancellor Rishi Sunak said: "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.

"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.

"That's why my focus remains fixed on doing everything we can to protect jobs, businesses and livelihoods."

Economists said that with Covid-19 restrictions expected to remain until early spring, the hit to the economy will continue over the next few months.

"We anticipate a sharp decline in activity during the first quarter of the year," said Kemar Whyte, senior economist at the National Institute of Economic and Social Research. "Nevertheless, growth will pick up from the second quarter onwards as restrictions ease on the back of a successful vaccination programme."

Britain has reported Europe's highest death toll from coronavirus and is among the world's highest in terms of deaths per head of population.

Much of the damage to the UK economy is attributed by economists to a high dependence on the service sector, which suffered particularly badly during the year because of lockdown.

However, Britain has vaccinated many more people than other European countries so far, raising the prospect of a bounce-back for its economy later this year.

That potential fast rebound prompted the Bank of England's chief economist to describe the economy as like a "coiled spring" ready to release large amounts of "pent-up financial energy".

Andy Haldane said on Thursday that consumer confidence would surge back thanks to the vaccine programme, with the economy firing "on all cylinders" by spring.