UK economy shrinks by 9.9% as Covid and Brexit collide

  • The UK economy suffered a record 9.9% contraction in 2020 as the impact of Covid-19 and preparation for Brexit hit at the same time.

    The Office for national Statistics has released data on the UK's economic performance in 2020, and it doesn't look good. The economy shrank by 9.9% throughout 2020, over double the previous largest annual fall the agency has on record. GDP shrank by less than 4% during the global financial crisis of 2009, making this by far the worst year on record for the UK.

    The economy showed 1.2% growth in December as everyone prepared for Christmas and some restrictions eased up. Economists are reporting that December's growth has staved off a double-dip recession, though this is kind of a technicality as we define recession by two successive quarters of economic shrinkage and it was narrowly avoided by just 1% by boosting business over the Christmas period.

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    The long-term economic damage of easing Christmas restrictions is yet to be fully assessed. The UK suffered major outbreaks throughout the start of 2021 as a result of household mixing and travel, with 42,549 new UK Covid-19 deaths since Christmas day (37.7% of all UK Covid deaths). Part of this spread is also attributed to the emergence of the new UK variant of the virus that spreads more rapidly.

    The impact of Covid is hitting every country around the world, but the UK is dealing with both the pandemic and the impact of Brexit at the same time. The full impact of Brexit won't be included in 2020 data, so the economy is not expected to recover in Q1 2021. Photos of backed up trailers unable to get through customs checks and stories of businesses made non-viable by new trade barriers have been coming out since January 1st, and deliveries to Northern Ireland have been badly disrupted.

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    The UK financial sector has also taken a massive hit due to Brexit as a deal was not worked out to allow the EU to recognise UK stock market regulations as equivalent to EU regulations. As a result, EU companies are unable to trade shares on the London stock exchange and most of the EU share trading has moved to Amsterdam. This week Amsterdam overtook London as the share-trading capital of Europe.

    Sources: BBC News, Independent, Statista

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    Brendan is a Sync NI writer with a special interest in the gaming sector, programming, emerging technology, and physics. To connect with Brendan, feel free to send him an email or follow him on Twitter.

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