"This is still quite a significant contraction, re-igniting fears for the first double-dip recession since the mid-1970s for the first quarter of 2021."
UK GDP fell by 2.6% in November as government restrictions reduced economic activity, according to the latest figures from the ONS.
The fall follows six consecutive monthly increases, including an upwardly revised 0.6% increase in October.
November GDP fell back to 8.5% below the levels seen in February 2020. GDP fell by 8.9% in the 12 months to November, compared with an annual decline of 6.8% to October.
The services sector acted as the main drag on growth in November, falling by 3.4% as restrictions on activity were reintroduced in response to the Covid-19 pandemic. The services sector is now 9.9% below the level of February 2020.
The ONS data shows that there were falls in output in all 14 services sub-sectors between October and November. The largest contributor to this fall was accommodation and food service activities, followed by wholesale and retail trade, other service activities and arts, entertainment and recreation, because of the reintroduction of restrictions in some parts of the UK. These four sectors accounted for nearly 80% of the fall in services.
Derrick Dunne, CEO at Beaufort Investment, commented: “The UK is on the brink of a double-dip recession once again after a 2.6% drop in GDP. After six months of growth, the latest measures needed to control the pandemic have caused another deep contraction, and this time, with the country expected to be in lockdown throughout the first quarter, it could be nigh on impossible to avoid another recession.
“Digging into the details, having seen slight growth in October, the services sector was dealt another blow, with pubs and restaurants unable to take advantage of the once busy lead up to the festive period. There were small positives however, as the construction and manufacturing sectors did experience some growth.
“While the vaccine rollout presents clear hope for the future, we must prepare for things to get worse before they get better.”
Richard Pearson, director at investment platform, EQi, added: “It was expected we would see a contraction in our monthly GDP. Although below the expected reduction of -5.7%, this is still quite a significant contraction, re-igniting fears for the first double-dip recession since the mid-1970s for the first quarter of 2021. The economy was already nearly 5% smaller at this point than at the beginning of 2020, so further contraction is calamitous.
“As anticipated for November’s GDP, the service sector was the hardest hit, with a fall of 3.4%. With the third lockdown in full swing, an uncertain end date, and a cancelled Christmas season, we can only imagine what future figures will look like. As we’re back in lockdown again, for the foreseeable future – or until the vaccine is more widespread – then we can expect the economy to keep being squeezed, despite the best efforts of government financial programs.
“It’s clear the road to recovery for our economy will be fraught with challenges. Times of such economic strife drive home the importance of saving when you’re able to, to prepare for more rainy days ahead or to ensure your long-term goals are protected. With the economy in dire straits, negative bank rates are not off the table – so anyone saving for the long-term should consider if their deposits might be better served away from dismal bank rates.”