Economic Perspectives –

GDP falls nearly 10% in 2020 but, after first quarter weakness, should recover well in 2021

The latest Perspective from Ruth Lea CBE, Economic Adviser to Arbuthnot Banking Group.


15th February 2021


Ruth Lea CBE


In this Perspective Ruth Lea, Economic Adviser to the Arbuthnot Banking Group, discusses the latest UK economic developments:

  • GDP increased by a better-than-expected 1.0% (QOQ) in 2020Q4.
  • Within the fourth quarter, December’s GDP grew by 1.2% (MOM) after the 2.3% (MOM) fall in November. December’s increase partly reflected strong growth in health (with the strongest contributions coming from the coronavirus testing and tracing schemes).
  • GDP fell by 9.9% in 2020, with the largest falls in consumer facing services industries. The output of accommodation and food services fell by 44.0%.
  • Even though the UK’s 2020 decline in GDP appears to be the worst of the major economies (bar Spain), the ONS once again pointed out that the UK’s methodology in calculating volumes of education and health were distorting international comparisons.   
  • The trade deficit deteriorated in 2020Q4, as imports rose by more than exports. There was some evidence of stockpiling ahead of the end of the transition period (31 December 2020).

Other news:

  • The European Commission’s Winter forecast was guardedly optimistic. After a weak start to 2021, economic recovery is expected to pick up during 2021, partly reflecting vaccination campaigns “gaining momentum”.
  • Oil prices have continued to firm, exceeding $62pb (Brent crude), a 13-month high.
  • Market expectations of negative interest rates have continued to weaken. And sterling has firmed, benefiting from the rapid vaccine rollout, as well as weakening expectations of negative interest rates and the UK/EU Trade and Cooperation Agreement (TCA).    

Ruth Lea said “The fall of 9.9% in GDP in 2020 was much as expected. Last week the Bank assumed the vaccination programme should lead to the significant easing of Covid-related restrictions and a rapid economic recovery, after a weak first quarter. This seems perfectly reasonable and the economy should recover well in 2021. There are, of course, huge uncertainties attached to this scenario. Much will depend on the nature and timing of the easing of lockdown restrictions.”



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Author -

Ruth Lea CBE

Ruth Lea CBE

Economic Adviser, Arbuthnot Banking Group

Ruth Lea CBE has been Arbuthnot Banking Group’s Economic Adviser since 2007 and was an Independent Non-Executive Director from 2005-2016.

Ruth co-founded Global Vision in 2007 and was Director until 2010, and was previously the Director of the Centre for Policy Studies (from 2004 to 2007), Head of the Policy Unit at the Institute of Directors (from 1995 to 2003) and Economics Editor at ITN (from 1994 to 1995).  Prior to ITN she was Chief UK Economist at Lehman Brothers, Chief Economist at Mitsubishi Bank, worked for 16 years in the Civil Service (the Treasury, the DTI, the Civil Service College and the Central Statistical Office) and was an economics lecturer at Thames Polytechnic (now the University of Greenwich).

She is the author of many papers and articles on economic issues and has been a Governor of the London School of Economics and Council Member of the University of London.

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