UK economy grew more than expected as Omicron raged

[LONDON] The UK economy grew stronger than expected at the end of last year, displaying resilience as the Omicron variant of the coronavirus spread.

Gross domestic product (GDP) expanded 1.3 per cent in the fourth quarter, the Office for National Statistics (ONS) said Thursday (Mar 31). That's more than the 1 per cent figure previously reported.

Service industries expanded more quickly than the ONS had previously estimated, and exports also enjoyed a bigger jump. The figures also showed the collapse in the economy at the height of the pandemic was not quite as bad as previously thought.

In 2020, GDP shrank 9.3 per cent rather than the 9.4 per cent previously estimated. The rebound in 2021 was correspondingly shallower, with growth of 7.4 per cent, down from the earlier estimate of 7.5 per cent. That's still the largest increase in GDP in a single year since World War 2.

At the end of 2021, the economy was just 0.1 per cent below its pre-pandemic peak. The shortfall was previously thought to have been 0.4 per cent and puts Britain in the middle of the Group of Seven nations for economic performance.

The ONS said there was a marked increase in output for human health and social work activities, reflecting what the National Health Service was doing to fight Covid. It also recorded stronger activity by employment agencies after the government's furlough benefit for workers ended in September.

There also was a surge in retail activity with consumers returning to shops at the end of the year. Hospitality suffered with people staying away from restaurants especially at the end of the quarter after the Omicron variant emerged, the ONS said.

Separate figures showed the current-account deficit, the gap between money coming into the UK and money leaving, narrowed sharply to £7.3 billion (S$13 billion) in the fourth quarter, equal to 1.2 per cent of GDP. That was the lowest since the end of 2019. The trade deficit shrank sharply as exports rebounded following a third-quarter slump.

The UK also recorded a £4.7 billion surplus on investment income, the first surplus since 2011. That reflects higher returns from investments that UK firms made abroad than their foreign counterparts made in Britain. BLOOMBERG