UK economy grows but government must act on cost pressures - Chamber

The UK economy rebounded in 2021 as Gross Domestic Product (GDP) grew by 7.5 per cent following the easing of Covid-19 restrictions, according to figures released today.

The Office for National Statistics (ONS) said the growth was ahead of forecast and occurred despite a contraction in December due to Omicron restrictions.

The strong recovery came after a 9.4 per cent collapse in 2020 as the pandemic spread and lockdown rules were imposed.

The economy had been recovering strongly at the end of last year, but Omicron restrictions saw a 0.2 per cent contraction in December.

Services output was down 0.5 per cent in December 2021, while production rose 0.3 per cent and construction increased by 2.0 per cent.

Services and construction were both above pre-coronavirus levels, by 0.5 per cent and 0.3 per cent respectively, while production remained 2.6 per cent below.

Output in consumer-facing services fell by 3.0 per cent in December, mainly driven by a 3.7 per cent fall in retail trade, while all other services rose by 0.1 per cent.

Meanwhile, total underlying goods imports grew £0.6bn (1.4 per cent) in December, due to a £0.6bn (2.5 per cent) rise in imports from non-EU countries.

Total underlying goods exports grew £1.1bn (3.9 per cent) driven by a £1.0 bn (7.4 per cent) increase in exports to EU countries.

Raj Kandola (pictured), head of policy at Greater Birmingham Chambers of Commerce, said: “The annual GDP results for last year paint a healthy picture overall as the UK grew at it fastest rate since the second world war.

“Lifting national restrictions led to a notable uplift in economic output throughout last year, however, this needs to be put into context given the huge drop in activity we saw when the pandemic first emerged in 2020.

“It was also no surprise to see GDP falling in December as the spread of the Omicron variant hampered consumer confidence across the retail and hospitality sectors.

“Nevertheless, concerns remain on the horizon with proposed tax rises and rampant inflation caused by supply chain disruption, labour market shortages and soaring energy prices all likely to have a material impact on disposable incomes as we approach Easter.

“In light of this, we would urge the Government to act now and reduce the crippling cost pressures firms are currently facing.

“Delaying the rise in National insurance, maintaining lower levels of VAT, offering financial support for those suffering from huge energy bills and continued reform of the business rates system will give firms a huge confidence boost as we emerge from the pandemic. ”