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UK economy grew more than thought at end of miserable 2020

Published 03/31/2021, 02:24 AM
Updated 03/31/2021, 04:15 AM
© Reuters. FILE PHOTO: Commuters walk across the London Bridge during the morning rush hour in London

By William Schomberg and Andy Bruce

LONDON (Reuters) -Britain's coronavirus-hammered economy grew more quickly than previously thought in the final three months of last year but still shrank by the most in more than three centuries in 2020 as a whole, official data showed on Wednesday.

Gross domestic product increased by 1.3% between October and December last year from the previous three-month period, the Office for National Statistics said.

That was stronger than an earlier estimate of 1.0% growth as the ONS received more data in recent weeks.

Economists polled by Reuters had expected the growth rate to remain at 1.0%.

In 2020, gross domestic product fell by 9.8% from 2019, only slightly less sharp than an initial estimate of a 9.9% slump.

Britain's economy suffered the biggest drop of all countries in the Organisation for Economic Co-operation and Development except for Argentina and Spain last year, OECD data has shown.

Britain's economy remained 7.3% smaller than before the pandemic, in inflation-adjusted terms, the second biggest drop among eight major economies listed by the ONS.

But in nominal terms - which is affected less by differences in the way countries compile the data - Britain stood middle of the pack.

Data also showed households were sitting on a big pile savings that the Bank of England thinks will fuel a jump in spending as the government lifts restrictions on the economy between now and late June.

The savings ratio rose to 16.1% from 14.3% in the third quarter and for 2020 as a whole it hit a record high of 16.3%, compared with 6.8% in 2019.

Separate data showed Britain's current account deficit widened to 26.3 billion pounds in the fourth quarter, almost double the shortfall in the third quarter, as firms rushed to import goods before the Jan. 1 start to the country's less open trade relationship with the European Union.

© Reuters. FILE PHOTO: Commuters walk across the London Bridge during the morning rush hour in London

But the deficit - a long-standing concern for investors because it leaves Britain reliant on foreign inflows of cash - came in below forecasts of 33 billion pounds in the Reuters poll.

It was equivalent to 4.8% of GDP, or 4.2% excluding volatile movements of precious metals such as gold.

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