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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

UK economy shrank 2.6% in November; firms win Covid-19 insurance case – as it happened

A near-deserted Arndale Centre in Manchester in November, during England’s second lockdown.
A near-deserted Arndale Centre in Manchester in November, during England’s second lockdown. Photograph: Oli Scarff/AFP/Getty Images

Closing post: Worst week for the FTSE 100 since October

And finally....Britain’s FTSE 100 index has posted its worst week since the end of October.

The blue-chip index has fallen nearly 1% today, closing 66 points lower at 6735.

That takes its losses this week to around 2%, the biggest fall since stocks surged in early November as Joe Biden won the presidential election and Pfizer reported successful vaccine trial results:

The FTSE 100
The FTSE 100 Photograph: Refinitiv

Mining stocks led today’s fallers, with Anglo American down 5.3%, Antofagasta dropping 3.6%, and BHP Group losing 3.3%.

The pound has also lost ground against the US dollar, down almost one cent at $1.36, as investors move money into safer assets.

European markets had their worst day since 21st December, falling around 1%, after US pharmaceutical Pfizer announced a temporary slowdown of deliveries of its COVID-19 vaccines.

Predictions that Joe Biden’s stimulus package could be watered down to win Senate approval, and worries about today’s fall in US retail sales and consumer confidence, are all weighing on the markets.

Neil Birrell, Chief Investment Officer at Premier Miton Investors, commented:

“Hard on the heels of the poor US employment data comes a disappointing retail sales number for December. Estimates were for it to be flat, but it fell by 0.7%.

The November number was revised down as well, making it a painful year end for the retail sector. It’s hard to think that the start of 2021 will show any improvement unless Biden can get cash into people’s pockets quickly.”

Plus, after weeks of strong gains, investors may be keen to book profits now that Biden has proposed his $1.9bn plan:

David Madden of CMC Markets explains:

Much of the gains that there achieved recently were in anticipation of Biden’s stimulus announcement. Lofty equity valuations combined with concerns that countries are going to extend their lockdowns have encouraged traders to exit the market.

Pfizer said the rolling out of its vaccine in Europe will be slowed in the near-term as the pharma giant upgrades its production facility, the news is playing into the bearish move too.

On Wall Street, the Dow (which hit record highs yesterday), is currently down 0.4% or 134 points at 30,857.

Edward Moya of OANDA says the latest weak US economic data is worrying investors:

Stocks are in the red as dealers are cutting back on their equity positions now that Biden’s relief package has been announced.

It is a little worrying that retail sales fell by 0.7% in December, the all-important shopping month. The November metric was revised from -1.1% to -1.4%. In addition to that, the New York Fed manufacturing reading for January was 3.5, the lowest in seven months. Lately there has been growing evidence the US economy is cooling and today’s reports adds weight to that view.

On that note, it’s time to wrap up. Here’s today’s main stories:

Goodnight, and have a lovely weekend. GW

The oil price is also dropping today, with Brent crude shedding 2.6% to around $55 per barrel.

Reuters reports that concerns about the latest lockdowns imposed in Chinese cities are pushing oil lower, alongside the general risk-off mood in the markets today.

Earlier this week it surged to its highest level in almost 11 months, at over $57 per barrel, on hopes that demand would rise this year as the global economy recovered.

This barrage of bad economic news seems to be weighing on the markets - with the FTSE 100 index now down 98 points, or 1.5%, in late trading.

Mining companies are among the fallers, with Anglo American losing almost 6%.

The optimism which lifted shares last week sharply higher last week is in short supply this afternoon; Germany’s DAX index has lost 2%, with France’s CAC down 1.9%.

The market has given the classic reaction to any major announcement – rally ahead of the anticipated news and fall when the facts are released, says Russ Mould, investment director at AJ Bell.

“Joe Biden has now released details of his proposed $1.9 trillion stimulus plan and while positive for helping to revive the US economy, financial markets have already priced in the good news and are now starting to worry about the negative side, namely how it will be funded.

“The large scale of the proposed support measures adds fuel to the fire that taxes and interest rates will have to go up. Both have negative connotations for equities, therefore casting a cloud on the ability for stock markets to keep rallying at the same pace they have enjoyed for much of 2021.

US consumer confidence drops

Consumer confidence across the US has fallen, following the attack on the Capitol last week and the ongoing Covid-19 pandemic.

The University of Michigan’s consumer sentiment index has dipped to 79.2 for January, down from 80.7 in December, and lower than the 80.0 reading expected.

Reuters has the details:

U.S. consumer sentiment dipped in early January as Americans reacted to the assault on the Capitol building in Washington and a relentless surge in COVID-19 infections and deaths, weighing on the economic outlook, the University of Michigan said on Friday.

The University of Michigan’s consumer sentiment index dropped to 79.2 early this month from a final reading of 80.7 in December. Economists polled by Reuters had forecast the index would be little changed at 80.

“Consumer sentiment posted trivial declines in early January despite the horrendous rise in COVID-19 deaths, the insurrection, and the impeachment of Trump,” University of Michigan Surveys of Consumers Chief Economist Richard Curtin said in a statement.

Wall Street opens lower

The New York stock exchange has opened in the red, as the markets end the week on the back foot.

  • Dow: down 182 points or 0.6% at 30,808.
  • S&P 500: down 10.2 points or 0.27% at 3,785.
  • Nasdaq: up 15 points or 0.1% at 13,127.

Stephen Innes, Chief Global Markets Strategist at axi, says some investors are sceptical that Joe Biden can quickly achieve the $1.9bn stimulus package he outlined last night:

Markets have largely shrugged off President-elect Joe Biden’s fiscal package realizing the number would inevitably end up being negotiated lower with the debate possibly dragging into April or longer if the Republicans have their way. And that’s far too complacent for markets and the Democrats 2022 agenda.

In particular, the Democrats and Biden will be extremely anxious to avoid the mistake former President Barack Obama made in his first term of the financial crisis of not pushing fiscal aggressively enough. Most Democrats believe that cost them the next round of midterm elections. Biden will do everything he can to put his fiscal agenda centre stage, likely holding back on tax hikes and pushing the economy as much as he possibly can to retain Congress in 2022

Despite this slowdown, US retail sales are still higher than a year ago - lifted by a surge in online spending during the pandemic.

Ben Casselman of the New York Times tweets:

US retail sales fall

Just in: US retail sales were much weaker than expected in December, in another signal that America’s economy is suffering from the Covid-19 pandemic.

Retail sakes fell by 0.7% last month, the third monthly fall in a row - sharply below forecasts that they’d be unchanged.

That follows a sharp jump in new unemployment claims yesterday, and shows why the US economy desperately needs a new stimulus programme - and to get to grips with the virus raging across the country.

Kwasi Kwarteng, Secretary of State for Business, Energy and Industrial Strategy, has also hailed the Supreme Court ruling on business interruption insurance - calling it a ‘lifeline’ for tens of thousands of small firms:

But Samantha Holland, head of insurance at law firm Gowling WLG, warns that policyholders might face further legal battles to force their insurers to pay out:

The FCA test case, coined as “probably the most important insurance decision of the last decade”, reached a culmination today as the Supreme Court handed down its judgment. This case has served to be a lengthy and significant battle, directly affecting 370,000 policyholders with wider implications for 700 types of polices across over 60 insurers.

Representing a landmark victory for many small businesses across the country, the Supreme Court found in favour of the FCA and the Hiscox Action Group and ultimately removed many of the hindrances that policyholders might have faced when claiming for cover.

In particular, the wider approach to the wording of prevention of access and hybrid clauses and the positive ruling on causation, that it is sufficient for a policyholder to show that at the time of any relevant Government measure there was at least one case of COVID-19 within the specified radius, will be good news for many policyholders, unlocking millions of pounds worth of claims for business interruption losses as a result of COVID-19.

Nevertheless, the judgment is not without its caveats and policyholders are therefore encouraged to carefully consider the small print of their own insurance policies in light of the judgment. Many are still likely to face months of uncertainty, and possibly their own legal battle, before their claims are actually paid.

Updated

Here’s Mel Stride MP, Chair of the Treasury Committee, on the Supreme Court’s ruling on business interruption insurance:

“This ruling will be welcomed by many businesses who are struggling through the pandemic; it may provide a lifeline for many of them.

As the Treasury Committee has been urging, it’s right that the FCA will now ensure that valid claims are paid by insurers as quickly as possible.”

Getting back to UK GDP... the NIESR thinktank predict the economy will slow sharply over the last quarter of 2020, and then contract in the first quarter of 2021.

They also point out that the negative short term economic cost of lockdowns is outweighed by the long-term health and economic benefits of combating Covid-19.

Having analysed today’s growth report, NIESR say:

  • November GDP data confirm that the second lockdown in England had a far smaller impact on economic activity than the first. The manufacturing sector, for example, operated 32 per cent below pre-Covid capacity in April but continued its recovery to only 7 per cent below in November.

  • December is likely to show some growth, but the emergence of the new strain weighed on activity in the second half of the month in particular. Taken together with today’s ONS data revisions we expect a slowing of growth in GDP to 0.9 per cent in the final quarter of 2020, implying a contraction of 9.8 per cent in 2020 overall.

  • With tighter Covid-19 restrictions required in January and likely to persist beyond, along with some post-Brexit adjustment, our initial forecast is for negative growth of 3.4 per cent in the first quarter of 2021.

  • As always, the short-term negative economic impact of lockdowns should be outweighed by the potential positive long-term health and economic impacts from controlling the virus and restoring confidence.

The Supreme Court ruling is a “comprehensive and resounding victory for policyholders”, says legal firm Mishcon de Reya, who represents the Hiscox Action Group (businesses seeking insurance payouts for disruption in the pandemic)

Richard Leedham, partner at Mishcon de Reya, explains:

“We are glad that the Supreme Court has found that the vast majority of policyholders of non-property damage Business Interruption (BI) cover will have cover for their business interruption losses caused by the national response of the Government to COVID-19. This includes most of the members of the Hiscox Action Group, whom we represented in the case, and RSA and now all QBE policyholders whom we represented at first instance through my partner Sonia Campbell and Hospitality Insurance Group Action. The Supreme Court has recognised that, just when this cover was needed most by thousands of UK businesses, insurers were wrong to argue that coverage was applicable only if there were narrow local restrictions, that they could deny claims because the cover had not been intended to be provided and/ or because the interruption and therefore losses would have happened in any event.

The judgment should be a massive boost to all businesses reeling from a third lockdown who can now demand their claims are paid. In a detailed analysis of insurance law on proximate cause and causation, the Supreme Court has clearly and efficiently torpedoed the academic and convoluted arguments of insurers and laid down clear guidance as to how these claims should be paid.

Insurance group Hiscox (one of the insurers in today’s case) says:

The Judgment handed down today comprises more than 100 pages of legal analysis by the Supreme Court addressing important points of insurance law and setting new precedent for over 50 insurers and almost 400,000 policyholders.

The Supreme Court largely confirms the outcome of the High Court’s ruling that, except in rare circumstances, cover is restricted to Hiscox policyholders who were mandatorily closed.

Fewer than one third of Hiscox’s 34,000 UK Business Interruption policies may respond as a result.

Hiscox has also increased its estimate for business interruption payouts in 2020 by $48m, following today’s court ruling and recent government restrictions.

Tens of thousands of small businesses that were forced to close during the Covid-19 pandemic are now set to receive payouts on insurance claims following what was described as a “historic victory” at the supreme court, my colleague Rupert Jones writes.

Judges threw out the appeals from six insurers and largely supported the arguments made by the Financial Conduct Authority and a policyholder action group.

The FCA has previously estimated the value of claims affected at about £1.2bn, though some analysts have said several billion pounds could be at stake.

The Hiscox Action Group said insurers should be “in no doubt that they should immediately start doing the right thing and settle these claims”.

And here’s the BBC’s take:

Tens of thousands of small businesses will receive insurance payouts covering losses from the first national lockdown, following a court ruling.

The Supreme Court found in favour of small firms receiving payments from business interruption insurance policies.

For some businesses it could provide a lifeline, allowing them to trade beyond the coronavirus crisis.

The ruling could cost the insurance sector hundreds of millions of pounds.

The Federation of Small Businesses is also celebrating the Supreme Court’s ruling in favour of policyholders in the landmark Financial Conduct Authority (FCA) business interruption insurance test case.

FSB chair Mike Cherry says businesses who are covered by disease or denial of access clauses in their insurance policies should receive payments quickly.

“Today’s judgement is a big victory. It cements the high court’s decision to grant businesses left on the brink the insurance pay-outs they are rightfully owed. For many, it has been a long and difficult road to get to this stage so this will bring clarity and hope to the thousands of firms which have been left in financial limbo for almost a year.

“While this is good news, and while the law has to follow procedure, it’s disappointing that so many small businesses have had to wait to get the money they desperately need under policies they believed were there to protect them, policies they bought in good faith.

“Businesses deserve to be protected in a timely way, but instead they have been failed by their insurers and are now trying to make up for lost time. Providers must now pay-out quickly, and consider the steps they can take to progress these claims in a swift and seamless manner. Any paperwork required of claimants shouldn’t be onerous or time-consuming.

“Small businesses contribute trillions to the economy. The Financial Conduct Authority (FCA) was right to argue that disease or denial of access clauses within interruption policies should trigger pay-outs in the event of coronavirus-linked disruption. We are hugely grateful for its work in this space.”

UK business groups are welcoming the Supreme Court ruling that thousands of businesses should be covered by their insurance for losses caused by coronavirus lockdowns.

Michael Kill, CEO of the Night Time Industries Association, says:

“This is a moral victory for thousands of businesses with Hiscox Business Interruption Insurance, that have been placed under unnecessary financial hardship because of the legal process that has been drawn out much longer than was necessary by Insurers”

“We are extremely pleased that the Supreme Court has dismissed the insurers appeal claims and supported the rights of thousands of businesses to be able to claim against their BI Insurance”

“We still have some detail to interpret on many of the other policies that have been reviewed by the Supreme Court, and will update throughout the day on the results”.

“I would like to thank the FCA for there support throughout this process and the legal guidance of Philip Kolvin QC through a very dark period for many businesses”

“It is now very important that insurers do the right thing and expedite the payment process”

Kate Nicholls of UK Hospitality says it’s ‘critical’ that payments are made quickly.

The FCA has said the Supreme Court has “substantially allowed” its appeal against the insurance industry on behalf of policyholders hurt by the pandemic.

Sheldon Mills, the FCA’s executive director for Consumers and Competition, says payouts should be made quickly:

‘Coronavirus is causing substantial loss and distress to businesses and many are under immense financial strain to stay afloat. This test case involved complex legal issues. Our aim throughout this test case has been to get clarity for as wide a range of parties as possible, as quickly as possible, and today’s judgment decisively removes many of the roadblocks to claims by policyholders.

‘We will be working with insurers to ensure that they now move quickly to pay claims that the judgment says should be paid, making interim payments wherever possible. Insurers should also communicate directly and quickly with policyholders who have made claims affected by the judgment to explain next steps.

‘As we have recognised from the start of this case, tens of thousands of small firms and potentially hundreds of thousands of jobs are relying on this. We are grateful to the Supreme Court for delivering the judgment quickly. The speed with which it was reached reflects well on all parties.’

UK Supreme Court hands businesses victory in COVID-19 insurance ruling

In a boost for firms hurt by the pandemic, The UK Supreme Court has ruled that thousands of businesses should be insured for losses amassed after the national lockdown.

The ruling settles a test case that pitched the markets regulator, the Financial Conduct Authority, against major insurers.

The insurers had argued that business interruption policies did not cover widespread disruption caused by the shutdown last year. The case centred on whether clauses related to infectious or notifiable diseases were triggered by the pandemic, and whether the closure of premises triggered the ‘prevention of access’ clauses.

Bloomberg has more details:

Insurers lost a last-ditch attempt to dodge payouts to thousands of small businesses that were forced to close during lockdown, as the U.K.’s top court ruled in favor of policyholders in a dispute over Covid-19 claims.

The U.K. Supreme Court ruled Friday that policies sold by six firms including RSA Insurance Group Plc and Hiscox Ltd. cover losses sustained when businesses were shut down to help slow the spread of the outbreak. The firms had appealed a lower-court decision in September that found some policies in a test case brought by the U.K.’s top markets regulator should pay out.

Markets fall despite Biden stimulus plan

European stock markets have dipped this morning.

In London the FTSE 100 is down 48 points, or 0.7%, at 6753, even though the UK economy didn’t shrink as much as expected in November.

The Europe-wide Stoxx 600 is down around 0.3%.

European stock markets, January 15 2021

In recent weeks, markets have been boosted by the prospect of a new US stimulus package - so Joe Biden’s announcement last night of $1.9bn for health support, vaccinations, and relief for families may already be priced in.

Derek Halpenny of Japanese bank MUFG reckons the plan could be trimmed back by the Senate .

That is down to the fact that passing legislation under ‘reconciliation’ does have its limits and aspects of the fiscal plan that have no Republican support could end up being removed.

The process of ‘reconciliation’ is complicated by what’s known as the “Byrd Rule” offers a way for Senators to object, with the Senate presiding officer then taking the advice of the non-partisan Senate parliamentarian to decide on the outcome. So the Democrats do not have carte-blanche in pushing this bill through.

There are plenty of aspects that could be passed under reconciliation but even those could get watered down given Biden has made much of his desire of reaching compromise and trying to end the partisan divisions in Congress.

Neil Wilson of Markets.com points out that there’s still uncertainty over some issues:

A little bit of buy the rumour, sell the fact about equity indices as they tread lower in the wake of president-elect Joe Biden’s $1.9tn stimulus package.

Like a good Roman emperor it’s got something for everyone – lots of bread, lots of circuses. The sticking plaster will suffice for now and we’ll see what the infrastructure package looks like in due course.

Other questions remain about the new administration’s longer-term ambitions – how much for green spending? How much more tax and regulation on banks, shale drillers and/or big tech? Will he soften trade relations with China? Will Yellen at Treasury embark on full MMT?

Here’s our economics editor Larry Elliott on today’s GDP figures:

Why was the drop smaller than expected? For a start, more of the economy remained open in November than it did during the first lockdown. Factories kept turning out goods, construction work was allowed, children continued to go to school.

In addition, a couple of one-off factors supported activity. One was that the knife-edge state of trade negotiations between the UK and the EU encouraged firms to stockpile as insurance against a no-deal outcome. A second was that there was a delay between England’s lockdown being announced and the restrictions coming into force, which allowed people to do some early Christmas shopping or have a meal out.

But as Paul Dales, the UK economist at Capital Economics has noted, the UK has built up some immunity to lockdowns. Firms have found ways of doing business despite the restrictions, such as providing click-and-collect services. Consumers don’t stop spending when the shops are shut: they simply shop online.

Paul Dales of Capital Economics has an encouraging take - he thinks the UK will avoid a double-dip recession, given the November slump wasn’t as bad as feared.

He explains:

As long as GDP didn’t fall by 1.0% m/m or more in December, then the economy wouldn’t have contracted in Q4 as a whole. January’s third lockdown, during which the schools are closed too, will take the level of GDP a bit lower than in November.

But the growing immunity of the economy to lockdowns is encouraging, means that vaccines may allow it to get back to its pre-crisis peak earlier than most had assumed and supports our view that the Bank of England won’t need to resort to negative interest rates.

Updated

Why wasn’t November’s contraction wasn’t as severe as March and April, during the first lockdown?

Jonathan Athow, the UK’s deputy national statistician, has written an interesting thread on this issue. The good news is that companies were better prepared this time - with retailers boosting their online sales, and more pubs and restaurants offering takeaways and click-and-collect.

The bad news is that some sectors are still so depressed that they simply don’t have as far to fall this time.

Full story: UK heads for double-dip recession as GDP falls 2.6%

Here’s my colleague Richard Partington on today’s GDP report:

The UK economy is heading for a double-dip recession after official figures confirmed a renewed slump in November as the second wave of the coronavirus pandemic took hold.

The Office for National Statistics said gross domestic product (GDP) fell by 2.6% month-on-month in November, when the government launched the second national lockdown in England and amid tougher controls in Scotland, Wales and Northern Ireland. City economists had forecast a steeper fall of 5.7%.

Confirming the first step towards a double-dip recession, the latest official figures end six consecutive months of growth over the summer, when the UK economy had been recovering from the first wave of the crisis.

The impact of renewed restrictions took GDP in November down to 8.5% below its pre-pandemic level, in a setback for Britain’s economic recovery from the first wave of the crisis.

GDP fell by 3% in the first three months of 2020 and plunged by 19% in the second quarter during the first lockdown – the biggest decline in history and plunging the UK into recession, which economists regard as two consecutive quarters of falling GDP. Growth returned in the summer with a record 16% rise in the third quarter.

After the decline in November, analysts forecast GDP will probably fall in the final quarter of 2020 and a further decline in the first three months of 2021 amid tougher lockdown restrictions at the start of the year would put the UK back in recession.

According to the latest figures from the economy, pubs and hairdressers suffered the biggest impact during the second English lockdown in November, as the hospitality sector was forced to close or operate as takeaway-only. The service sector – which includes activities such as retail, hospitality and finance, and is typically the growth engine of the British economy – shrank by 3.4%.

However, the ONS said many firms adjusted to the new working conditions during the pandemic, schools stayed open, and manufacturing and construction generally continued to operate, meaning the economic damage was significantly smaller in November than during the first lockdown. Industrial production – which includes manufacturing, as well as energy production – fell marginally, by 0.1%, while keeping building sites open boosted the construction sector with 1.9% growth on the month.

Updated

The Covid-19 pandemic has now caused the three largest falls in monthly UK GDP since records began in January 1997, the ONS says:

  • 18.8% April 2020
  • 7.3% March 2020
  • 2.6% November 2020

Updated

James Smith, research director of the Resolution Foundation, predicts the UK is falling into a double-dip recession, having contracted by 2.6% in November.

“The sharp GDP fall in November as England entered its second national lockdown suggests that the UK is in the midst of a double dip recession as it starts the year with even stricter restrictions.

“But while the economic story today is of only the second-ever double dip recession on record, the story of the year will be a vaccine-driven bounce back in economic activity for sectors like hospitality and leisure.

“The Chancellor must do everything he can to support that recovery once public health restrictions ease.”

Professor Costas Milas of the University of Liverpool has plotted this graph which shows how economic activity has weakened as the stringency of the Covid-19 restrictions has risen:

UK GDP
UK GDP Photograph: Professor Costas Milas

He explains:

With the enforcement of a second lockdown in November 2020, GDP recovery went into reversed. Indeed, November’s GDP stood at 8.9% below its pre-pandemic level, sharply down from 6.5% one month earlier. This looks really bad but UK economic performance has been revised slightly upwards for the May to October period!

Looking forward, the economic picture remains bleak, at least in the short run. In response to additional anti-contagion measures (most notably the third lockdown in January 2021), Google mobility developments, which serve as a proxy for consumer expenditure suggest a further drop in economic activity for 2021Q1:

In fact, the latest Google mobility data (up to January 2021) suggest the UK economy will perform much worse in 2021Q1 compared to the last quarter of 2020.

James Sproule, UK chief economist of Handelsbanken, predicts that UK GDP will keep falling through December and January:

“This morning’s numbers are considerably better than forecast and would give credibility to ONS data suggesting that those businesses which have been able to remain open, have become increasingly adept at maintaining revenues despite lockdowns.

“This said, at least two more months of negative data can be expected, with December reflecting widespread near lockdown and January the renewed national lockdown, before some sort of steadier path upwards can be anticipated.

Updated

Alpesh Paleja, CBI lead economist, is optimistic that the covid-19 vaccination programme will help the economy recover from its lockdown downturn.

With the country locked down for virtually all of November, the reduction in economic activity comes as no surprise.

“But, as expected, the impact of the second lockdown was significantly smaller than the downturn seen in the spring. Steps taken by businesses earlier in the year to Covid-proof their operations – combined with the time-limited nature of the restrictions, and schools remaining open – meant more companies were able to continue trading safely.

“However, the tougher current lockdown means a bigger hit to the economy lies ahead. Nonetheless, with vaccine rollout gathering pace, there are tangible reasons for optimism later in 2021.

“Getting on top of the pandemic remains key to reigniting the economy. Businesses stand ready to lead the revival and continue to look to the Government to help them through to the recovery phase.”

Economist Samuel Tombs of City firm Pantheon is encouraged that November’s GDP figures aren’t as bad as feared:

Customer-facing services companies suffered the biggest drop in output in November, as many were forced to shut down again, as this chart shows:

Uk service sector

Construction firms, though, managed to keep operating in November - although social distancing rules have reduced capacity.

UK construction output to November

The ONS explains:

This monthly growth is driven by increases in both infrastructure (9.6%) and private new housing (4.7%) meaning both sectors are above their pre-pandemic February 2020 levels at 9.1% and 4.2% respectively.

Sunak: thing will get harder before they get better

Britain’s Chancellor of the Exchequer Rishi Sunak.
Britain’s Chancellor of the Exchequer Rishi Sunak. Photograph: Kirsty Wigglesworth/AP

Chancellor of the Exchequer, Rishi Sunak, says the fall in GDP in November shows the scale of the challenge facing the country:

“It’s clear things will get harder before they get better and today’s figures highlight the scale of the challenge we face.

“But there are reasons to be hopeful- our vaccine roll-out is well underway and through our Plan for Jobs we’re creating new opportunities for those most in need. With this support, and the resilience and enterprise of the British people, we will get through this.”

Updated

The ONS tweets:

Here’s a sectoral breakdown of the UK economy in November:

UK services sector

Updated

Services sector bears brunt of downturn

The UK’s service sector suffered the biggest fall in growth in November, contracting by 3.4%.

Unsurprisingly, the hospitality sector shrank the most - with pubs and restaurants forced to close during the November lockdown.

The ONS says:

There were falls in output in all 14 services sub-sectors between October and November 2020. The largest contributor to this fall was accommodation and food service activities, followed by wholesale and retail trade, other service activities and arts, entertainment and recreation, because of the reintroduction of restrictions in some parts of the UK.

These four sectors accounted for nearly 80% of the fall in services.

The services sector, which makes up roughly three quarter of the economy, is now 9.9% smaller than before the pandemic began in February.

Production suffered a smaller hit, with output down 0.1%, which leaves it 4.7% below the February 2020 level.

But encouragingly, the construction sector grew by 1.9% in November 2020, and is now 0.6% above the February 2020 level.

UK GDP to November 2020

Introduction: UK GDP fell 2.6% in November

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

The UK economy has shrunk again, as restrictions imposed to fight the spread of the Covid-19 pandemic weigh on growth.

Figures just released show that UK GDP contracted by 2.6% in November - the month when England was placed in a second national lockdown, and tough measures were also enforced in Wales and Scotland.

This decline means the UK’s six-month run of growth since the first lockdown ended has now halted, and could be the first step towards a double-dip recession.

But, it’s not as severe as the 5.7% decline that the economists had expected.

The ONS says:

Following six consecutive monthly increases, including an upwardly revised 0.6% increase in October, real gross domestic product (GDP) fell by 2.6% in November 2020.

Restrictions were in place to varying degrees across all four nations of the UK during November.

The fall means the economy was 8.5% smaller in November than in February 2020, just before the pandemic.

GDP fell by 8.9% in the 12 months to November 2020, compared with an annual decline of 6.8% to October, the ONS adds.

More details and reaction to follow...

Also coming up today

Investors are digesting Joe Biden’s ambitious $1.9tn coronavirus relief proposal, aimed at urgently combating the pandemic and the economic crisis it has triggered.

It includes $160bn to bolster vaccination and testing efforts, and other health programs and $350bn for state and local governments, as well as $1tn in relief to families, via direct payments and unemployment insurance.

It also includes boosting the latest payments to Americans by $1,400, lifting them from $400 to $2,000

The president-elect, who also proposes raising the federal minimum wage to $15 an hour, declared:

“There’s no time to waste. We have to act and we have to act now.”

But, the proposal could run into opposition in the tied Senate.

On the economic front, we also get new eurozone trad figures today, plus the latest US retail sales and consumer confidence reports.

The agenda

  • 7am GMT: UK GDP report for November
  • 7am GMT: UK trade balance for November
  • 10am GMT: Eurozone trade balance for November
  • 1.30pm GMT: US retail sales for December
  • 2pm GMT: NIESR thinktank’s estimate of UK GDP in Q4 2020
  • 3pm GMT: University of Michigan survey of US consumer confidence

Updated

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Jim Carrey 2026 Conspiracy Theory: Who Is Alexis Stone? Drag Performer Says He 'Performed' the Actor in Paris
UK drag performer Alexis Stone claims to have impersonated Jim Carrey at the César Awards, sparking social media debate.
International Business Times UK
International Business Times UK
Zendaya Pregnancy Rumors Resurface as Secret Marriage Leaks—Is This the Real Reason for Tying the Knot?
Zendaya pregnancy rumours return amid news of a hidden marriage, leaving fans eager for confirmation from the couple.
International Business Times UK
International Business Times UK
Jim Carrey Theories Reach New Heights After Drag Queen Reveals Mask He Wore To Pose As The Actor
“How much they pay you to try and close this theory up?”
Bored Panda
Bored Panda
Strong opinions matter: Why some birds refuse to follow the flock
We like to think that animals, including humans, follow the crowd. Think of a flock of pigeons taking off from the city square together or the recent frenzy over labubus. If most of the group does something, surely the individual will copy.
The Conversation
The Conversation
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