THE UK economy shrank by 2.6% in November after England was placed in lockdown for a second time, according to official figures.
But the numbers from the Office for National Statistics were better than the 5.6% slump that had been expected.
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November’s decline came after six consecutive months of growth, with a 0.6% improvement in October.
The UK gross domestic product is now 8.5% below its pre-pandemic peak in February 2020.
Experts are warning the UK faces a possible double-dip recession once the true impact of a third national lockdown on the economy is revealed.
A double-dip is recession when the economy shrinks, briefly recovers, and then enters recession again.
What this means for your personal finances
GROSS domestic product (GDP) is one of the main indicators used to measure the performance of a country’s economy.
When GDP goes up, the economy is generally thought to be doing well although today’s figures aren’t as strong as hoped.
Negative growth often brings with it falling incomes, job cuts and lower consumption.
The Bank of England (BoE) uses GDP as one of the key indicators when it sets the base interest rate.
This decides how much it will charge banks to lend them money, and is a way to try to control inflation and the economy.
So, for example, if prices are rising too fast, the BoE could increase that rate to try to slow the economy down. But it might hold off if GDP growth is slow.
The BoE cut interest rates twice in March due to coronavirus.
Base rate cuts means mortgage borrowers now typically benefit from lower rates, but at the other end of the scale savers earn less on their savings.
To measure GDP, the Office for National Statistics (ONS) collects data from thousands of UK companies.
Andrew Wishart, UK economist at Capital Economics, told The Sun the full impact of the crisis on jobs and businesses will only become apparent once the government starts to withdraw its support.
The research firm expects unemployment to double from 4 per cent to 8 per cent, with the same number of companies likely to go bust.
Chancellor Rishi Sunak said: “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 … we’re creating new opportunities for those most in need,” he added.
England entered into a second national lockdown on November 5 to stop a rising cases of coronavirus ahead of Christmas.
The month-long shutdown saw all non-essential retail, including clothes and homeware stores, forced to close.
Pubs and restaurants were limited to offering takeaway and deliveries only.
Schools were allowed to stay open but traders warned of the devastating affect restrictions would have on the busiest trading season of the year.
How can you recession-proof your finances?
IF you’re worried about the recession hitting your finances then we explain how to protect yourself.
CHECK YOUR FINANCES
Take a look at where you can cut costs. Are there any subscriptions you could cancel? Could you haggle down a bill?
Reassess your finances and work out where to save cash and then save this money into a rainy day fund.
PAY OFF YOUR DEBTS
Make sure you’re repaying priority debts and if you’re struggling speak to your lender.
Use a tool such as MoneySavingExpert.com’s eligibility checkers to check which cards and loans you’re likely to be accepted for without it hurting your credit score.
You can get FREE debt advice from places like Citizens Advice and StepChange.
DIVERSIFY YOUR PENSIONS AND INVESTMENTS
If you’ve got a pension or investments make sure your pots are well diversified.
Being overexposed to one asset class or one particular company could put your savings at risk if something goes wrong.
ONS statistician Darren Morgan said: “Many businesses adjusted to the new working conditions during the pandemic … while schools also stayed open, meaning the impact on the economy was significantly smaller in November than during the first lockdown.”
The country plunged into the “worst ever” recession earlier this year, when the economy shrank for two quarters in a row – the technical definition of recession.
The economy bounced back and grew by 15.5% in the three months to September, meaning the UK is no longer in recession.
Before the emergency Tier 4 restrictions were enforced the week before Christmas, the UK economy was expected to grow in the first quarter of 2021.
During a recession there is a rise in unemployment.
Redundancies have hit record highs with 370,000 workers losing their jobs in the three months to October due to the coronavirus crisis and 1.7million now unemployed.
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Employees may also find it harder to get promotions or pay rises.
You may find it harder to get credit, and banks have already started cutting deals on the top credit cards.
Some banks have also turned down furloughed workers for mortgages and lenders have pulled some mortgage products from the market, especially for first-time buyers.
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