The economy grew at its best annual pace on record in 2021 despite a December hit from measures to control the spread of the Omicron COVID variant, early official estimates have revealed.
Data from the Office for National Statistics (ONS) showed the pace of growth between October and December – the fourth quarter – was largely static on the previous three months at 1%.
That was despite gross domestic product (GDP) contracting by 0.2% – slightly better than economists had expected – during December compared to the prior month.
Consumers were already found to have brought forward purchases for Christmas to October and November in anticipation of supply chain disruption and tighter COVID rules, including guidance to work from home, that were introduced to protect the NHS amid record case numbers.
It meant, the ONS said, that the economy grew by 7.5% over the course of 2021.
All its figures are subject to future revision but it followed the deepest slump for 99 years in 2020 when the pandemic first took hold, plunging large parts of the economy into hibernation as lockdowns were introduced for the first time.
The government’s hope, looking ahead, is to live with COVID without the need for tough curbs on activity.
December’s Plan B restrictions in England were less harsh than the measures introduced in Wales and Scotland – all of which have since been mostly relaxed – and Downing St is planning to end all legal restrictions in England at the end of the month.
However, the impact of such a move could be limited in the short term amid signs the economy is straining under the weight of rising prices, as inflation is tipped to rise sharply from its highest level in 30 years currently.
After the Bank of England warned last week of a record slide in living standards ahead, separate data from the ONS on Thursday showed a third of businesses were recording lower than expected revenues – with almost two-thirds of accommodation and food services firms affected as consumers tightened their belts.
The UK economy is reliant on consumer spending as services accounts for four-fifths of output.
Budgets are facing the tightest squeeze from April when the energy price cap uplift of almost £700 takes effect while there is also no sign of an immediate easing in the global supply chain crisis that has dramatically forced up commodity and shipping prices.