Britain’s economy is on the brink of a double-dip recession after shrinking 2.6% in November amid spike in COVID-19 cases

• Britain’s economy shrank 2.6% in November as England entered another deadlock.
• Britain is on the brink of a double-dip recession and faces a harsh winter as COVID cases rise.
• Still, a rapid rollout of vaccines could help the economy recover in the spring and summer.

Britain’s economy shrank 2.6% in November as an increase in coronavirus infections and new restrictions took a heavy toll, official figures showed, putting the country on track for a double recession hollow.

November’s drop was considerably smaller than the 5.7% contraction predicted by economists in a Reuters poll. But that meant the economy was 8.5% smaller than it was in February 2020, after being 6.1% smaller in October, the Bureau of National Statistics said.

Since November, the UK government has tightened lockdown measures, which means more pain is yet to come for the economy.

Ministers are, however, focused on rolling out coronavirus vaccines, which they hope will allow growth to start rebounding again in the spring.

The 2.6% contraction in November, when England was stranded for a month, followed an expansion of just 0.6% in October.

The services sector, which is very important in Britain, fell 3.4% in November, the ONS said, but the production sector only contracted 0.1%.

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This puts the UK on course for a double-dip recession – with an economy set to sink into a prolonged period of contraction after a return to growth in the third quarter of 2020.

Coronavirus cases have exploded in recent weeks, in part thanks to a new, more infectious variant. More than 370,000 people have tested positive in the past seven days while more than 7,500 people have died, up 50% from the previous week.

Commenting on the economic figures, Chancellor Rishi Sunak said: “It is clear that things are going to get more difficult before they get better and today’s figures highlight the scale of the challenge we face.

“But there are reasons for hope. Our vaccine deployment is well underway and thanks to our employment plan, we are creating new opportunities for those who need it most,” said the Minister of Finance.

The UK economy contracted at a record pace of around 20% in the second quarter of the year, before growing by around 16% over the next three months.

But many economists are now predicting that gross domestic product declined in the last quarter of 2020, and many say it is expected to contract further in the first three months of 2021.

The pound fell slightly on Friday morning, slipping 0.2% on the day against the dollar to trade around $ 1.3663, although it was higher from a session low of $ 1.3659 .

The FTSE 100 fell 0.42% at the opening as traders digested the data. Benchmark 10-year gilt yields in the UK were a little lower at around 0.287%.

Many analysts pointed out that the GDP decline in November was not as bad as expected. Alpesh Paleja, senior economist at the Confederation of British Industry, said the impact of the looser restrictions in November was “significantly less than the slowdown seen in the spring”.

“Steps businesses took earlier in the year to secure their COVID operations – combined with the time-limited nature of the restrictions and the schools that remained open – allowed more businesses to continue trading safely. “

However, Goldman Sachs predicted last week that the new nationwide lockdown put in place earlier this month would cause the UK economy to contract 1.5% in the first quarter of 2021.

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“We estimate the economy will be about 11% below its pre-COVID level by the end of the first quarter,” Goldman Sachs said.

“The fundamental reason is that business in the UK is more dependent on covid-sensitive consumer spending than any of the other major advanced economies.”

The Bank of England increased its bond buying program to 150 billion pounds ($ 205 billion) in November in a bid to ease economic conditions amid further lockdowns.

BoE Governor Andrew Bailey said on Tuesday that Britain was going through “very difficult times”. Yet he said that “the darkest hour is the one before dawn”.

Bailey said Tuesday there were “a lot of problems” with cutting interest rates into negative territory from the current record high of 0.1%. His comments helped the pound.