Covid: UK’s economy shrunk faster than at any point in 100 years in 2020

Credit: PA

The UK’s economy shrunk at its fastest rate since the 1920s last year, as the pandemic forced thousands of businesses to remain closed for several months.

The Office for National Statistics revealed that gross domestic product (GDP) dropped by 9.9%.

However, after registering a 1.2% growth in December, despite strong restrictions across large parts of the country, the economy looks set to avoid what could have been its first double-dip recession since the 1970s.

A double-dip means two recessions within a short period of time, while a recession is defined as two consecutive quarters where the economy contracts.

According to Bank of England historical data, 2020 marked the worst performance for the economy since the Great Frost hibernation of 1709 - more than 300 years ago - when a bitterly cold European winter, followed by widespread floods, stymied activity.In response to the figures, Chancellor Rishi Sunak acknowledged that last year, the economy "experienced a significant shock".

He said: "Whilst there were some signs of resilience over winter, what's clear is many families and businesses are experiencing hardship."

  • The Chancellor acknowledges the huge economic hit the UK has taken

The Chancellor also promised a "comprehensive plan for jobs to support people through the economic crisis".

"We will set out the next stage of our economic response at our budget in early March," he said.

He also advised against comparing the UK's economic performance with those of other countries.

"We calculate GDP in a different way to pretty much everyone else," he said.

"If you either correct for that difference and look at it in a way that's more comparable nominal GDP, what you find is that our performance is very much in line with other countries."

  • Rishi Sunak says the UK's GDP cannot accurately be compared with that of other countries

When asked whether the government's Eat Out to Help Out deals led to an increase in transmissions, the Chancellor insisted the scheme was necessary.

"What that was about was about trying to protect and support two million people who work in the hospitality industry that's suffered devastating impacts from this pandemic," he said.

ONS deputy national statistician for economic statistics Jonathan Athow said: “Loosening of restrictions in many parts of the UK saw elements of the economy recover some lost ground in December, with hospitality, car sales and hairdressers all seeing growth,"

"An increase in Covid-19 testing and tracing also boosted output,”

“The economy continued to grow in the fourth quarter as a whole, despite the additional restrictions in November.

“However, GDP for the year fell by nearly 10%, more than twice as much as the previous largest annual fall on record.”

The 9.9% fall marks the worst year for the UK economy since records began.

GDP was first measured in the aftermath of the Second World War, and the measure has never previously dropped by more than 4.1%.

That last big drop was in 2009, but the Bank of England has also estimated historic GDP going bank centuries.

These measures come with caveats, but if correct, 2020 would be the worst year since 1921.