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UK economy shrinks 2.6% in November

(Sharecast News) – The UK economy shrank 2.6% in November but beat expectations as the government imposed a second Covid-19 lockdown on England, official figures showed.
The drop in output ended six consecutive months of growth as all four nations in the UK put restrictions in place in an effort to stem a resurgence of coronavirus infections, the Office for National Statistics said. Britain entered a stricter shutdown in early January that could last for months.

Output in November dropped back to 8.5% less than in February compared with a 61% shortfall in October. The economy was 8.9% smaller than a year earlier compared with an annual decline of 6.8% the month before.

The result showed the economy holding up better than the 4.6% average drop forecast by analysts as businesses adapted to restrictions.

The services sector was most affected, dropping 3.4%, with hairdressers and pubs the hardest hit. Production edged down 0.1% with factories open and often busy ahead of the Brexit trade deadline. Construction expanded 1.9%.

Darren Morgan, ONS director for economics statistics, said: “The economy took a hit from restrictions put in place to contain the pandemic during November. However, many businesses adjusted to the new working conditions during the pandemic, such as widespread use of click and collect as well as the move online.

“Manufacturing and construction generally continued to operate, while schools also stayed open, meaning the impact on the economy was significantly smaller in November than during the first lockdown.”

After the government imposed further restrictions on personal contact and business activity in early January Chancellor Rishi Sunak said the economy would get worse before it improves.

Samuel Tombs, a UK specialist at Pantheon Macroeconomics, said: “GDP will be significantly lower in January than in November, because schools have shut during this lockdown and mobility data suggest that fewer people are leaving their home. In addition, manufacturing output likely will fall sharply in January, as the Brexit deadline on December 31 created a strong incentive for overseas customers to bring forward orders to Q4.”

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