In November, a month before Omicron swept across Britain, the country’s economy reached a milestone: it surpassed its pre-pandemic size for the first time.
Gross domestic product rose 0.9% month-on-month in November, with the construction and manufacturing sectors rebounding as some businesses were less affected by supply shortages, according to the Office for National Statistics. Wholesalers and retailers also made an important contribution.
The economy was thus 0.7% larger than it was in February 2020, before the pandemic plunged the UK into a deep recession.
Unless the economy contracts more than 0.2 percent in December and there are no more revised data, quarterly GDP for the last three months of the year, a more conventional statistic, will also exceed its pre-pandemic level, the statistical office said. .
But the British economy is expected to take a hit in December. Omicron has driven coronavirus cases to an all-time high, the government has ordered people to work from home, restaurants and bars have faced massive cancellations, staffing shortages have been rampant, and the Treasury has had to resume some financial support for businesses due to the pandemic.
In December, the Bank of England cut its fourth-quarter growth forecast by half a percentage point, leaving the economy 1.5 percent smaller than its pre-pandemic size. The central bank added that government measures and voluntary social distancing will put pressure on the economy in the first quarter.
While the daily number of Covid-19 cases in the UK is falling again, the economy will face other headwinds in the next few months. Households are facing a notable rise in the cost of living as inflation is expected to peak at around 6 percent in the spring, electricity bills rise significantly and taxes are around the corner.
“It looks like Omicron will disappear almost as quickly as it came, thanks in part to the rapid deployment of additional strikes,” Samuel Tombs, an economist at Pantheon Macroeconomics, wrote in a note to clients. He said he expects production to recover in February.
But growth since the middle of the year “is likely to be sluggish as real household incomes are squeezed by high inflation and taxes and exports remain constrained by Brexit,” he added.