UK heads for double-dip recession as GDP falls 2.6%

The UK economy is heading for a double-dip recession after official figures confirmed a renewed slump in November as the second wave of the coronavirus pandemic took hold.

The Office for National Statistics said gross domestic product (GDP) fell by 2.6% month-on-month in November, when the government launched the second national lockdown in England and amid tougher controls in Scotland, Wales and Northern Ireland. City economists had forecast a steeper fall of 5.7%.

Confirming the first step towards a double-dip recession, the latest official figures end six consecutive months of growth over the summer, when the UK economy had been recovering from the first wave of the crisis.

The impact of renewed restrictions took GDP in November down to 8.5% below its pre-pandemic level, in a setback for Britain’s economic recovery from the first wave of the crisis.

GDP fell by 3% in the first three months of 2020 and plunged by 19% in the second quarter during the first lockdown – the biggest decline in history and plunging the UK into recession, which economists regard as two consecutive quarters of falling GDP. Growth returned in the summer with a record 16% rise in the third quarter.

After the decline in November, analysts forecast GDP will probably fall in the final quarter of 2020 and a further decline in the first three months of 2021 amid tougher lockdown restrictions at the start of the year would put the UK back in recession.

According to the latest figures from the economy, pubs and hairdressers suffered the biggest impact during the second English lockdown in November, as the hospitality sector was forced to close or operate as takeaway-only. The service sector – which includes activities such as retail, hospitality and finance, and is typically the growth engine of the British economy – shrank by 3.4%.

However, the ONS said many firms adjusted to the new working conditions during the pandemic, schools stayed open, and manufacturing and construction generally continued to operate, meaning the economic damage was significantly smaller in November than during the first lockdown. Industrial production – which includes manufacturing, as well as energy production – fell marginally, by 0.1%, while keeping building sites open boosted the construction sector with 1.9% growth on the month.

Analysts said the decline in November was relatively modest, showing that many companies had adapted well to lockdown. After Boris Johnson gave a lengthy notice period for the lockdown, which started on 5 November and lasted until 2 December, the first few days of the month were also been among the busiest days of the year for some companies, as consumers rushed to shops, pubs and restaurants before they closed.

The figures come as the chancellor, Rishi Sunak, comes under renewed pressure to provide additional financial support to businesses and workers struggling at the start of 2021 during the third national lockdown in England, as the cumulative impact of almost a year living through the pandemic takes its toll.

Anneliese Dodds, the shadow chancellor, said the UK had already had the worst recession of any major economy earlier in 2020 and was in danger of a “devastating double dip”.

“That’s the cost of this Conservative government’s incompetence and indecision. Instead of securing our economy, the chancellor is winding down economic support and hitting families with a triple hammer blow of pay freezes, a cut to universal credit and a hike in council tax,” she said.

Sunak said it was clear that “things will get harder before they get better” and that the latest official figures underscored the challenge facing the country.

He added: “But there are reasons to be hopeful – our vaccine rollout is well under way and through our ‘plan for jobs’ we’re creating new opportunities for those most in need. With this support, and the resilience and enterprise of the British people, we will get through this.”