Sunak says Covid-19 affect continues as UK economy sinks in January

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 (12).

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

Finance minister Rishi Sunak said that data showed how Covid-19 continued to affect the economy.

"Today's figures highlight the impact the pandemic continued to have on our economy at the start of the year as we tackled the new variant of the virus - and I know this is a cause of concern for many," Sunak said in a statement.

He added that the vaccine rollout and his budget announced last week were reasons to be hopeful.

The export of goods to the EU tanked by 41 per cent to £5.6 billion ($7.8bn) 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 per cent 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.

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

Overall, UK exports dropped 19.3 per cent while imports slid 22 per cent.

The ONS added that the economy was 9 per cent 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-per cent 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.

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.

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 per cent collapse in the economy last year -- its worst performance in more than three centuries.