UK economy shrinks 1.5% in first quarter due to Covid lockdowns Business News

The UK economy contracted 1.5% between January and March due to lockdown restrictions, the Office for National Statistics (ONS) said.

The first quarter slump was weaker than expected, with GDP growing 2.1% more than expected in March.

Growth that month was aided by the reopening of schools and strong retail sales, despite restrictions still in place.

Construction and manufacturing also advanced 5.8% and 2.1% respectively in March.

However, the first quarter results still mean an 8.7% drop from pre-coronavirus levels, according to the ONS.

Darren Morgan, ONS Director of Economic Statistics, said: “The strong recovery seen in March, led by retail trade and the return of schools, was not enough to prevent the UK economy from contracting over the whole of the first quarter, with the blockage affecting many of the service sector.

“However, construction advanced strongly during the quarter and, in March, was above its pre-pandemic level.

“The manufacturing sector has also recovered from an initial slump, increasing sharply in February and March, as businesses continued to adapt and secure themselves from Covid-19.”

The latest ONS figures indicate the UK economy has become more resilient in the face of challenges caused by coronavirus lockdowns. The economy contracted 2.5% in January, before growing 0.7% in February.

Reflecting on the first three months of 2021, Howard Archer, Chief Economic Advisor of the EY Item Club, described the economy as “fairly resilient”, claiming that the decline in GDP had been “much less than feared at the start of the quarter.”

“Lessons have clearly been learned and experience gained to maintain economic activity,” he added.

Last week, the Bank of England revised its economic forecast for 2021, forecasting growth to be 7.25% for the year, the strongest rebound since World War II. This is in line with the optimism of the corporate sector about the easing of restrictions and the successful deployment of the vaccine.

Speaking on Wednesday, Chancellor Rishi Sunak said: “Despite a difficult start to the year, economic growth in March is a promising sign of things to come.

“As we cautiously reopen the economy, I will continue to take all necessary steps to support our recovery.”