UK economy shrank by 2.9% in January

The UK economy shrank 2.9 per cent in January as lockdown measures took effect while exports to the EU collapsed, official figures show.

Goods exports to the EU plunged by 40.7 per cent in January and imports fell 28.8 per cent as businesses battled with new trading arrangements and a raft of red tape following the end of the Brexit transition period. The monthly falls in imports from and exports to the EU are the largest since records began in 1997.

There were no similar falls in Britain’s exports to non-EU countries, indicating that Brexit was a primary reason for the sharp decline in trade.

Separate data revealed that gross domestic product (GDP) remained 9 per cent below its pre-pandemic peak. Services - which make up the bulk of the UK economy - fell 3.5 per cent and manufacturing was down 2.3 per cent, while construction grew 0.9 per cent.

Manufacturing declined for the first time since April as car production dropped significantly, the Office for National Statistics said.

“The UK took a notable hit in January, albeit smaller than some expected, with retail, restaurants, schools and hairdressers all affected by the latest lockdown,” said Jonathan Athow, deputy national statistician for economic statistics.

Alpesh Paleja, lead economist at the Confederation of British Industry (CBI), said: “Activity fell in January, as widely expected, with much of the UK entering some form of lockdown at the start of the year.

“However, the decline was notably smaller than the first lockdown in spring 2020, demonstrating the growing ability of businesses and households to adapt to greater restrictions on mobility.”

Trade figures show exports of goods to the EU fell £5.6bn in January as businesses sought to adapt to new trading arrangements after Brexit.

Compared to the previous January, goods exports to the EU were down 38 per cent while non-EU goods exports fell 8 per cent.

Significant declines were registered across all sectors with food and live animal exports to the EU among the worst affected, falling 54 per cent. Fish & shellfish exports collapsed by 83 per cent compared to January 2020 from £92m to £16m.

Source: The Independent