UK economy shrinks again in January

Bury St Edmunds town centre during the third UK lockdown Picture: CHARLOTTE BOND

The UK economy shrunk again in January as the third lockdown took hold. Picture: CHARLOTTE BOND - Credit: Charlotte Bond

The UK economy shrank again in January as the third national lockdown took hold and snuffed out a slight rise at the end of 2020.

Gross domestic product (GDP) declined by 2.9% month on month in January, reversing a rise of 1.2% between November and December, the Office for National Statistics (ONS) said.

GDP remained 9% below its pre-pandemic levels in January.

The fall came at a time when the economy had been placed under some of the toughest restrictions since coronavirus first hit a year ago.

However, businesses have adapted better to changing circumstances, the data suggests, with the 2.9% decline lower than the 4.9% economists had predicted.

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The services sector took the brunt of the fall, shrinking by 3.5% in January as rafts of hospitality and leisure firms were forced to shut due to new lockdown restrictions.

The sector is now 10.2% smaller than it was in February 2020, before the impact of the pandemic was first fully felt.

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Construction grew by 0.9% during the month as its recovery continued and new work came in.

But the production sector fell by 1.5% in January 2021, after manufacturing contracted for the first time since last April – down 2.3% – according to the figures.

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