UK Economy Sinks On Virus Curbs, As Brexit Slams Trade

Britain's economy hit reverse in January on renewed coronavirus curbs while the nation's post-Brexit EU goods exports suffered a record collapse, official data showed Friday.

Gross domestic product shrank 2.9 percent after 1.2-percent growth in December, the Office for National Statistics said in a statement, with heavy falls in services, production and manufacturing on Covid-19 restrictions.

"The economy took a notable hit in January with retail, restaurants, schools and hairdressers all affected by the latest lockdown," said ONS statistician Jonathan Athow.

"Manufacturing also saw its first decline since April, with car manufacturing falling significantly," he said, adding that the health sector was boosted by Covid testing and vaccines.

The export of goods to the EU tanked by 41 percent to ?5.6 billion ($7.8 billion, 6.5 billion euros) in January from December, in the first month since Britain's final Brexit divorce.

The value of EU goods imported into Britain also sank, by a record 29 percent or ?6.6 billion.

However, the British government described the performance as "inevitable" due to various factors, adding that freight levels have since returned to normal.

"A unique combination of factors, including stockpiling last year, Covid lockdowns across Europe, and businesses adjusting to our new trading relationship, made it inevitable that exports to the EU would be lower this January than last," said a government spokesperson.

"This data does not reflect the overall EU-UK trading relationship post Brexit and, thanks to the hard work of hauliers and traders, overall freight volumes between the UK and the EU have been back to their normal levels since the start of February."

The nation's departure from the EU was finalised on January 1, after the government clinched a long-awaited Brexit trade deal over Christmas.

Yet Britain has experienced a rocky start to life outside the bloc, with some UK exporters complaining of huge hurdles to previously seamless continental trade.

Overall, UK exports dropped 19.3 percent while imports slid 22 percent.

The ONS added Friday that the economy was 9.0 percent smaller in January than its pre-pandemic level in February 2020.

Reduced activity in education and consumer-facing industries such as hospitality drove a 3.5-percent contraction in the services sector.

Much of the UK re-entered lockdown in early January to curb a variant Covid-19 strain that was deemed more transmissible.

Restrictions were similar to initial curbs imposed in the second quarter of 2020 that sparked a recession.

However, this month, the government eased Covid-19 restriction measures in a phased reopening, as some 23 million people in Britain have received at least a first vaccination.

Children returned to school in England on Monday for the first time since January under the initial stage of a phased re-opening.

Curbs are set to be fully lifted by late June but this depends on infection rates.

More than 123,000 people have died of Covid-19 across the UK, making it one of the world's worst outbreaks.

The coronavirus crisis sparked a 10-percent collapse in the economy last year -- its worst performance in more than three centuries.