Britain's economy set to shrink sharply in early 2021

Britain's economy is set to shrink sharply in early 2021 though manufacturers are upbeat about prospects later in the year, when they expect lockdown restrictions to end. Meawhile, British manufacturers reported their slowest output growth since May last month, hit by Brexit and Covid-19-related delays, and consumers cut back heavily on borrowing in January as they returned to lockdown.The speed of the recovery for households will also be critical. Bank of England data showed consumer borrowing in January suffered its biggest annual decline since records began in 1994, sliding 8.9%.

Britain entered a third national lockdown in January, closing schools, non-essential shops, restaurants and most other businesses open to the public, though people can still travel to work if needed. Finance minister Rishi Sunak has announced an extra 5 billion pounds ($7.0 billion) of support for services firms and plans to offer more aid in an annual budget on Wednesday. The BoE expects the economy to shrink 4% in the first three months of 2021 - a sharper decline than during any quarter of the 2008-09 financial crisis though much less than the 20% drop last spring.

Meanwhile, the opposition Labour party’s finance spokeswoman Anneliese Dodds has said that UK Chancellor of the Exchequer Rishi Sunak is “economically illiterate,” while his policies have cost jobs and risk strangling the country’s recovery from the coronavirus pandemic. “After a year of last-minute scrambles, of U-turns, waste and mismanagement, what families and businesses need from the chancellor is a clear plan,” Dodds said.