The UK is on the verge of a double-dip recession after GDP fell 2.6%

The UK economy contracted 2.6% in November as the country re-entered lockdown, setting a near-safe course for a double-dip recession.

The decline is due to six consecutive monthly increases, including an upwardly revised 0.6% increase in October, according to the Office of National Statistics. The November decline was below the -5.7% forecast by a Reuters poll of economists, but many predict the effects of the current notch filters will get worse.

Overall, UK GDP grew 4.1% in the three months to the end of November but remained 8.5% below its pre-pandemic peak.

The FTSE 100 opened 0.4% less than the news at 6,773.

Hopes for a recovery since restrictions were lifted in early December were dashed when much of the country was placed in tier three restrictions before Christmas.

Retail was down 42% during the critical holiday season, according to the latest Coronavirus Business Impact Survey.

The critical service sector was hardest hit, falling 3.4% over the month, with pubs and hairdressers having the biggest impact. The sector has shrunk by 9.9% since February 2020.

The manufacturing sector also declined 0.1%, meaning it has shrunk for five straight months and is 4.7% below pre-pandemic levels.

Construction, a sector that remained on the move during the pandemic, grew 1.9% in November and rebounded to 0.6% above February levels.

Paul O’Connor, head of multi-asset at Janus Henderson Investors, said the indicators suggest that economic activity continued to decline from November through the New Year, suggesting that November data is unlikely to be a “low point in the current year “Downturn”.

“With the new strain of coronavirus still spreading rapidly in the UK and hospitals under immense pressure, economic risks remain on the downside for the first quarter amid the continued threat of tighter or longer-lasting pandemic restrictions,” he said.

“The UK economy’s relatively strong vaccination program is the light at the end of the tunnel, encouraging investors to look through the short-term darkness and focus on the prospect of reopening quickly from the second quarter onwards.”

Citywire AAA rated Jon Hudson, Manager of the Premier Miton UK growth Fund added, “The 2.6% decline was better than feared by many economists, and many retailers suggested pushing Christmas shopping ahead in anticipation of tighter restrictions.

“With the UK leading on vaccine rollouts and Brexit concerns in the rearview mirror, we can look forward to an economic recovery from the spring with growing confidence.”


The UK is on the verge of a double-dip recession after GDP fell 2.6%

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