UK economy shrank in January, data reveals

18 Mar 2021

The UK economy shrank by 2.9% in January as the third coronavirus (COVID-19) lockdown took its toll and Brexit hit exports, according to the latest figures from the Office for National Statistics (ONS).

The ONS said that the drop was caused by declines in retail trade and education as non-essential shops and schools were closed across the UK. Although the drop was less than feared by some analysts, the UK economy is now around 9% smaller than in January 2020.

Exports of goods to the EU plunged by almost 41% in January, while imports from the bloc dropped by 28.8%, the ONS reported.

Commenting on the data, Alpesh Paleja, Lead Economist at the Confederation of British Industry (CBI), said: 'Activity fell in January as widely expected, with much of the UK entering some form of lockdown at the start of the year. However, the decline was notably smaller than the first lockdown in spring 2020, demonstrating the growing ability of businesses and households to adapt to greater restrictions on mobility.

'There are reasons for optimism, with vaccine rollout proceeding at pace.'