UK GDP contracts 1.5% in first quarter

The UK GDP fell by 1.5% in the first quarter of 2021, new figures from the Office for National Statistics (ONS) have revealed.

The level of GDP is now 8.7% below where it was in Q4 2019, before the COVID-19 pandemic hit the UK.

Compared with the first quarter of 2020, when the initial economic impacts of coronavirus pandemic began to show, the UK economy has fallen by 6.1%.

The ONS reported contractions in services and production output, although construction output grew over the quarter. In output terms, school closures and a large fall in retail sales earlier in the quarter dragged down GDP growth.

AJ Bell financial analyst, Danni Hewson, suggested the latest GDP figures “demonstrate the resilience of the British public”.

“Despite the reopening of schools, the lockdown for many sectors was still very much in place and yet the economy was blossoming,” Hewson commented.

“Buoyed by the vaccine rollout houses were being built, cars and motorcycles repaired, and goods being produced in Covid-secure facilities. Recovery with a capital R and this growth has particular significance because it shows how the economy can function if future lockdowns arise.

“That’s further evidenced by the extent of the first quarter contraction, 1.5% is significantly lower than the 4% that had been predicted. There is still a lot of ground to be made up, but March’s figures suggest a quick recovery is within reach.”

Killik & Co associate investment director, Rachel Winter, added: “It’s important to bear in mind that this data is backward looking, and we hope that the figures for the second quarter will illustrate the reopening of the economy that began at the end of the first quarter. The Bank of England has predicted an economic expansion of 7.5% for the full year 2021.
 
“This morning’s GDP was not all negative, and it was pleasing to see growth in construction due to the high levels of activity in the housing market and the recommencement of large building projects. This has been reflected in strong share price performances from the housebuilding and materials sectors.”

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