The Omicron Covid variant took hold during the festive season and had a negative effect on GDP as shopping trips, entertainment tickets and restaurant bookings were cancelled.
According to the Office for National Statistic (ONS) estimates, GDP fell by 0.2 per cent in December 2021 to equal its pre-coronavirus pandemic level in February 2020.
This was down from the 0.7 per cent growth recorded in November. Over the fourth quarter, GDP grew by 1.0 per cent, but the estimate was still 0.4 per cent below the pre-pandemic level.
The biggest drag on the figure was output in consumer-facing services, with a fall in retail trade and fall in food and beverage services. This was followed by a decline in real estate activity, while construction helped to offset the level.
While 2020 saw a slump of 9.4 per cent, 2021 saw record growth of 7.5 per cent, last seen in 1948.
‘Storm clouds gathering’
Annabelle Williams, personal finance specialist at Nutmeg, said: “Today’s news confirms that the Omicron variant didn’t have the disastrous effect on the economy over the festive season, which was widely feared back in November. GDP fell by 0.2 per cent in December 2021 but is at its pre-coronavirus level.
“But storm clouds have gathered rapidly over the economy, with interest rates doubled, £700 added onto the typical energy bill and inflation expected to hit 7.2 per cent in April. On top of that, national insurance contributions are rising for individuals and businesses, adding extra costs to already strained budgets.”
Danni Hewson, AJ Bell financial analyst, added: “2021 as a whole did deliver a storming performance with record growth of 7.5 per cent. Yet, we need to consider that growth came off the back of 2020’s spectacular contraction when lockdowns stopped almost everything in its tracks but when you compare the UK’s performance to other G7 countries over the last year it stands head and shoulders above the rest of the pack.
“Will 2022 see the UK quickly shake itself off after December’s blip or will supply constraints and those rising prices keep the lid on things? One percent growth in Q4 is pretty good going when you think about those empty high streets dressed up for a Christmas party that never took place. Household consumption has been a key factor in the UK’s growth story, the question is will households still have the fire power as additional budget pressures exert a choke hold.”