Resilience of UK manufacturing saves country from worse GDP fall

MAKE UK manufacturing report

The resilience of the UK’s manufacturing sector and an increase in construction in November meant that the UK’s GDP fell less than expected.

Monthly gross domestic product (GDP) fell by 2.6 per cent during November 2020, according to the latest Office of National Statistics data, 8.5 per cent below February 2020 levels.

Alpesh Paleja, Lead Economist at the CBI said: “With the country locked down for virtually all of November, the reduction in economic activity comes as no surprise.

“But, as expected, the impact of the second lockdown was significantly smaller than the downturn seen in the spring. Steps taken by businesses earlier in the year to Covid-proof their operations – combined with the time-limited nature of the restrictions, and schools remaining open – meant more companies were able to continue trading safely.

“However, the tougher current lockdown means a bigger hit to the economy lies ahead. Nonetheless, with vaccine rollout gathering pace, there are tangible reasons for optimism later in 2021.

November 2020 saw the first monthly fall since April 2020 as business restrictions impacted economic activity.

Not surprisingly, the monthly fall was driven by accommodation and food and beverage services, wholesale, retail and motor trades, other service activities, and arts, entertainment and recreation.

Within production, manufacturing grew but this was offset by falls across mining and quarrying, energy and water and waste.

Construction output in November 2020 was 0.6 per cent above February 2020, with repair and maintenance work 7.4 per cent above and new work 3.1 per cent below its pre-pandemic level.

Head of Economics at the British Chambers of Commerce, Suren Thiru, added: “The latest figures highlight the continued damage being done to the UK economy by coronavirus.

“The decline in output in November was largely driven by the drag on activity from the second lockdown, with consumer-focused services firms, who are most exposed to lockdown restrictions, enduring a particularly difficult month.

“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 postBrexit disruption persists through the quarter.

“A clear and comprehensive plan is urgently needed to support the economy throughout this year. This should include closing the current gaps in government support and providing more significant grant funding to support cash strapped businesses. A fit-for-purpose Test, Trace and Isolate system remains critical to keeping the economy moving once the current lockdown ends.”

Alpesh Paleja at the CBI, added: “Getting on top of the pandemic remains key to reigniting the economy. Businesses stand ready to lead the revival and continue to look to the Government to help them through to the recovery phase.”