Record GDP drop but bright spots on the horizon - Chamber

Despite facing down the barrel of the largest drop in annual economic activity in almost a century, the UK avoided a double-dip recession and some bright spots remain on the horizon out of the crisis, business leaders have said today in response to new gross domestic product (GDP) figures.

According to Office of National Statistics data published today, UK GDP contracted by 9.9 per cent last year - marking the largest annual fall on record.

However, statistics also show that in the final quarter of 2020 is estimated to have grown by 1.0 per cent, following revised 16.1 per cent growth in the third quarter.

Services, production and construction output grew in the last quarter, although output of these industries remained well below pre-pandemic levels.

Health also contributed positively to growth in December, as a result of increased activity, mainly due to the coronavirus testing and tracing schemes across the country.

There was further recovery in government consumption and, to a lesser extent, business investment in quarter four of 2020 reflecting the easing of public health restrictions, however, the levels remain below their pre-lockdown level.

Despite two consecutive quarters of growth, the GDP is down 7.8 per cent compared to the final quarter of 2019.

Paul Faulkner (Pictured), chief executive of Greater Birmingham Chambers of Commerce, said that although the economic figures look gloomy, some bright spots, accelerated by the Covid vaccine roll out, remain on the horizon.

He said: “The dreaded double dip recession has been avoided but Britain is still staring down the barrel of the biggest drop in annual economic activity in almost a century.

“We should also put into context just how much sharper this fall could have been had it not been for the unprecedented scale of Government intervention throughout the year, particularly in relation to the furlough scheme, a huge round of Quantitative Easing and the extensive package of grant funding and bank loans which has saved countless businesses across the country from going to the wall.

“Surveying starts for our latest Quarterly Business Report begins next week and we will be able to gain a firmer understanding of the extent to which local businesses have been impacted by the latest national restrictions and how they 've reacted to the end of the transition period with the EU - early data from our Documentations team points to a raft of Brexit stockpiling as businesses await to assess an ever changing landscape .

“In the short term the challenge for the Chancellor is clear - as we 've set out in our Back our Businesses Plan, the Government needs to step up and offer a comprehensive package of support which will help businesses survive and in due course thrive.

“Also, let 's not forget the bright spots on the horizon; the accelerated vaccine roll out offers real hope that we can start to take tentative steps towards opening up large swathes of our society and economy over the course of the year.

“As lockdown measures ease, the Bank of England expect consumer spending levels to rocket as households have built up £250 billion worth of savings - unlocking those purse strings and creating a platform for businesses to invest in their people and products is going to be crucial as we look forward to brighter days. ”

Click here to access the Chamber 's Back our Businesses report

Click here to sign up to Quarterly Business Report Q1 Launch event - Adapting to the New Economic Landscape in Greater Birmingham