- On a quarterly basis, U.K. gross domestic product is estimated to have increased by 1% in the final three months of the year.
- Though the omicron variant did not present the significant setback initially feared in November, the U.K. economy faces a raft of challenges in 2022.
LONDON — The British economy grew 7.5% in 2021, official figures revealed Friday, rebounding from its historic 9.4% plunge in 2020 when pandemic restrictions stifled activity.
On a quarterly basis, U.K. GDP (gross domestic product) is estimated to have increased by 1% in the final three months of the year. It follows a downwardly revised 1% increase the previous quarter, the Office for National Statistics (ONS) said on Friday.
In December, GDP contracted by 0.2% as the omicron Covid-19 variant forced renewed caution and containment measures, though economists polled by Reuters had expected a more severe 0.6% contraction.
The largest contributors to the quarterly rise in output were from "human health and social work activities driven by increased GP visits at the start of the quarter," according to the ONS, along with a "large increase in coronavirus (Covid-19) testing and tracing activities and the extension of the vaccination programme."
The ONS said economic output in the fourth quarter remained 0.4% below its pre-pandemic level (in the fourth quarter of 2019).
"The UK's self-imposed lockdown to 'protect Christmas' has turned out to have only a mild impact on growth in December. This is an encouraging sign for the health of the economy," said Emma Mogford, fund manager of the Premier Miton Monthly Income Fund.
Though the omicron variant did not present the significant setback initially feared in November, the U.K. economy faces a raft of challenges in 2022.
The Bank of England now expects inflation to peak at 7.2% in April and has imposed back-to-back interest rate hikes for the first time since 2004, taking the main Bank Rate from 0.1% to 0.5%, with more tightening expected.
Meanwhile, the country's energy regulator has increased its price cap by £693 ($938) per year from April 1 because of soaring energy prices, placing further strain on millions of households.
The Bank of England also slashed its GDP growth forecasts last week, cautioning that the impact of inflation means the economy is likely to grow 3.75% in 2022 instead of the 5% it previously projected.
"The cost of living has become a big concern for millions of people and if it continues for a sustained period of time, it will be harmful to the wider economy," said Annabelle Williams, personal finance specialist at British online investment management firm Nutmeg.