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The UK economy is heading for a double-dip recession, after the Office for National Statistics (ONS) confirmed that coronavirus restrictions held back growth in November.

Following six consecutive monthly increases – including an upwardly revised 0.6% in October – real gross domestic product (GDP) fell by 2.6%.

The services sector acted as the main drag on growth in November, falling by 3.4% as restrictions on activity were reintroduced in some parts of the UK in response to the pandemic. The services sector is now 9.9% below the level of February 2020.

The production sector also fell marginally by 0.1%, remaining 4.7% below the pre-pandemic level.

Elsewhere, the construction sector saw positive growth of 1.9% in November, recovering to 0.6% above the February 2020 level.

There were falls in output in all 14 services sub-sectors between October and November. The largest contributor to this fall was accommodation and food service activities, followed by wholesale and retail trade, other service activities and arts, entertainment and recreation.

These four sectors accounted for nearly 80% of the fall in services, according to the ONS.

The three largest falls in monthly GDP, since records began in January 1997, all occurred in 2020: 18.8% April; 7.3% in March and 2.6% November.

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Results from Wave 21 of the Business Impact of Coronavirus Survey – carried out in late December – showed that of businesses currently trading, 42% reported their turnover had decreased below what is normally expected for December, compared with 45% reporting decreases at the end of November.

The accommodation and food service activities industry, along with the arts, entertainment and recreation industry, had the highest percentages of businesses experiencing a decrease in turnover compared with normal expectations for this time of year; both at 76%.

This was followed by the other service activities industry – which includes hairdressing and other beauty treatment activities – at 69%.

The ONS also gave a trade update, revealing that the UK’s total trade deficit for November, excluding non-monetary gold and other precious metals, widened by £0.6 billion to £1.5 billion.

Imports increased by £2.4 billion (4.9%), while exports increased £1.9 billion (3.9%).

November saw rising imports in machinery and transport equipment, particularly electrical machinery, which includes equipment for distributing electricity and household equipment.

British Chambers of Commerce head of economics Suren Thiru commented: “With any post-lockdown rally in output in December constrained by the tougher tiered restrictions, including the introduction of tier 4 measures, the UK economy is likely to have contracted in the final quarter of 2020.

“A third lockdown means that a double-dip recession in the first quarter of this year may be inevitable, particularly if the current post-Brexit disruption persists through the quarter.

“A clear and comprehensive plan is urgently needed to support the economy throughout this year,” he concluded. “This should include closing the current gaps in government support and providing more significant grant funding to support cash strapped businesses.”



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Post Author: EDONS