UK economy sees biggest drop in 300 years

The UK's economy slumped by 9.9% in 2020 - the lowest in over 300 years - as the coronavirus ravaged the country, narrowly avoiding another recession, according to the latest data from the Office of National Statistics.

Figures show GDP grew by 1% between October and December and numbers look set to continue rising later in 2021 as the country attempts to bounce back from three lockdowns as vaccines become more widely available.

Eurozone poised for recovery as pandemic restrictions lift

Output also grew by 1% for the same time frame, preventing a third-consecutive quarter where the economy shrank.

However, year-on-year output was down 7.8% on 2019 numbers, which clearly illustrates the effect the pandemic has had on British industry. This means the UK saw twice the decline Germany did and three times more than the US.

The economy is expected to continue shrinking for the first few months of 2021, owing to the effects of the third national lockdown, which is not expected to be lifted until mid-March.

The Bank of England predicts a 4% drop in GDP in the first three months of 2021 due to the new lockdowns as well as Brexit disruptions.

The fourth-quarter gains were partly due to government stimulus packages and gross capital formation.

The year-on-year losses mark the British economy's biggest hit since the great frost of 1709.

Rishi Sunak, the UK's chancellor for the exchequer, said in a statement: “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."

Sunak has initiated the biggest borrowing scheme since World War 2, and is set to continue relaying information on the initiative at a conference on March 3.

Despite its massive losses, Britain has avoided the top spot for European economies.

Spain's economy contracted by 11% in 2020 thanks to the crippling effects coronavirus had on the country's economy.

The UK still retains the highest death toll from Covid in Europe and is among the world's highest in deaths per capita.

Conversely, the UK also has the highest vaccination rate in the world, as society's most vulnerable are immunised against the disease as part of the government's vaccination scheme.

Read more: Majority of care homes in the UK offered Covid vaccine

Britain's manufacturing sector saw a 2.5% contraction on 2019 numbers. This loss could be attributed to social distancing measures still allowing factories to remain open, albeit at reduced output.

This has also lead to an increase in digitalisation in the workplace, which has allowed businesses - particularly in manufacturing and industry - to continue output in the face of the pandemic.

Government subsidies, such as the furlough scheme, helped keep people in work, which helped mitigate unemployment numbers. However, this has led to unemployment figures rising by a lower amount than previously predicted.

The UK's service industry was the most hit, with pubs, bars and restaurants remaining closed through the worst of the lockdowns. This sector saw a drop of roughly 7.2%.

The government's "eat out to help out" scheme helped salvage the service industry and lowered inflation while, but also had dubious links to a resurgence in Covid cases which led to the second lockdown.

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