GDP fell in December but 2021 sees record growth of 7.5%
The Omicron Covid variant took hold during the festive season and had a negative effect on GDP as shopping trips, entertainment tickets and restaurant bookings were cancelled.
According to the Office for National Statistic (ONS) estimates, GDP fell by 0.2% in December 2021 to equal its pre-coronavirus pandemic level in February 2020.
This was down from the 0.7% growth recorded in November. Over the fourth quarter, GDP grew by 1.0%, but the estimate was still 0.4% below the pre-pandemic level.
The biggest drag on the figure was output in consumer-facing services, with a fall in retail trade and fall in food and beverage services. This was followed by a decline in real estate activity, while construction helped to offset the level.
While 2020 saw a slump of 9.4%, 2021 saw record growth of 7.5%, last seen in 1948.
‘Storm clouds gathering’
Annabelle Williams, personal finance specialist at Nutmeg, said: “Today’s news confirms that the Omicron variant didn’t have the disastrous effect on the economy over the festive season, which was widely feared back in November. GDP fell by 0.2% in December 2021 but is at its pre-coronavirus level.
“But storm clouds have gathered rapidly over the economy, with interest rates doubled, £700 added onto the typical energy bill and inflation expected to hit 7.2% in April. On top of that, national insurance contributions are rising for individuals and businesses, adding extra costs to already strained budgets.”
Danni Hewson, AJ Bell financial analyst, said: “2021 as a whole did deliver a storming performance with record growth of 7.5%. Yet, we need to consider that growth came off the back of 2020’s spectacular contraction when lock downs stopped almost everything in its tracks but when you compare the UK’s performance to other G7 countries over the last year it stands head and shoulders above the rest of the pack.
“Will 2022 see the UK quickly shake itself off after December’s blip or will supply constraints and those rising prices keep the lid on things? One percent growth in Q4 is pretty good going when you think about those empty high streets dressed up for a Christmas party that never took place. Household consumption has been a key factor in the UK’s growth story, the question is will households still have the fire power as additional budget pressures exert a choke hold.”