UK economy shrinks, but likely to avoid double-dip recession

Several economists warned that Britain remained at risk of a renewed slump, with the economy likely to shrink in both the final quarter of 2020 and the first three months of 2021

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.

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.

The 2.6% monthly decline in Friday’s 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.