Chancellor Rishi Sunak hails GDP figures as showing 'economy is getting back on track'

The recession has hit the youngest and those on the lowest incomes the hardest, ITV News Business Editor Joel Hills reports

The Chancellor has said Wednesday's GDP figures show the "economy is getting back on track" - despite the economy shrinking 1.5% in the first quarter of 2021.

The economy was hit by January's Covid lockdown restrictions at the start of the year, but a resilient performance in March helped soften the blow.

GDP rose by a better-than-expected 2.1% month on month despite continued restrictions.

Rishi Sunak said: "Today's figures show the economy is clearly getting back on track and crucially that our plan for jobs is working. 

'The economy is clearly getting back on track' says Chancellor

"Now of course many businesses and families are still facing tough times and that’s why our support is continuing."

The impact on the country's economy appears to be much smaller than the first lockdown in March 2020, when activity plunged 5.8% in March - sending first-quarter GDP tumbling in the biggest fall since the end of 2008 at the height of the financial crisis.

Asked if he could guarantee he will continue to offer financial support if Covid restrictions continue, the chancellor told ITV News current support "goes well beyond the end of the roadmap.

"For example, furlough continues through to the Autumn - ditto with our business rates holidays, VAT reductions - so the support we've put in place is already designed to last well beyond the end of the roadmap."

Will the government continue to offer financial support if restrictions remain?

Throughout the pandemic, however, the country has seen repeated returns to lockdown and restrictions.

Quizzed on whether businesses could still look forward to June 21 as the end of Covid restrictions, Mr Sunak said "we continue to be meeting the tests" to do so.

On whether that would include the end of one metre social distancing, a rule that limits capacity in hospitality venues especially, the chancellor said the government would continue to "look to be able to do that".

ONS Director of Economic statistics Darren Morgan described the March bounce back as "strong" and said growth had been seen in other sectors.

Government will 'look to be able to' end one metre rule says Sunak

"Construction grew strongly over the quarter, and in March, was above its pre-pandemic level. Manufacturing also recovered from an initial fall, increasing strongly in February and March, as businesses continued to adapt and make themselves Covid-19 secure.

"Exports of goods to the EU continued to increase in March and are now almost back to their December level.

"However, imports from Europe remain sluggish in the first three months of the year, being outstripped by non-EU imports for the first time on record."

Economic research consultancy Pantheon Macroeconomics described the UK's economy as slow compared to other G7 countries.

"The UK economy almost certainly was the laggard in the G7 for a fourth consecutive quarter in Q1," the group said.

"GDP was some 8.7% below its pre-Covid Q4 2019 level, much worse than the 0.9% decline in the US., 4.4% in France, 4.9% in Germany and 6.9% in Italy."

Businesses and non-essential shops have reopened over recent weeks. Credit: PA

It comes after GDP also lifted by an upwardly revised 0.7% in February as the economy becomes more adept at weathering Covid lockdowns.

But this was not enough to offset a 2.5% fall in January - revised down by the ONS from a previous 2.2% estimate - at the start of the lockdown.

The ONS added that GDP is still 8.7% below levels seen before the pandemic struck.