UK ECONOMY SHRINKS BUT AVOIDS DOUBLE DIP RECESSION

Britain’s economy shrank in November as it went into a new lockdown, but the decline was smaller than expected as businesses adjusted to social distancing and schools remained open, making a double-dip recession less likely, David Milliken and William Schomberg reported for Reuters.

The 2.6% monthly decline in official data was the first since April but less than half the average contraction forecast in a Reuters poll of economists. The scale was also far smaller than April’s 18.8% collapse during Britain’s first lockdown.

“Overall, the growing immunity to lockdowns suggests that the economy is not quite as sick as we thought,” said Paul Dales, chief UK economist at Capital Economics.

The world’s sixth-biggest economy shrank more than its peers in the first half of 2020 and is now 8.5% smaller than it was in February, before the start of the pandemic.

A third, stricter lockdown that began this month is likely to cause Britain’s economy to contract in the first quarter of 2021, when many businesses are facing post-Brexit barriers to trade with the European Union (EU).

“It’s clear things will get harder before they get better and today’s figures highlight the scale of the challenge we face,” finance minister Rishi Sunak said. But Britain’s roll-out of vaccines - which has been faster than elsewhere in Europe - was a reason to be hopeful, he added. Several economists warned that Britain remained at risk of a renewed recession, with the economy likely to shrink in both the final quarter of 2020 and the first three months of 2021.

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