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GDP Q1 2021 First Estimate

Headlines:

  • UK GDP is estimated to have contracted by 1.5% in the first quarter of 2021, reflecting the impact of the third national lockdown.
  • However, this performance is better than many anticipated at the start of the year. The UK economy showed resilience as businesses and consumers adapted to life under restrictions. By means of comparison, the UK economy shrank 19.5% in Q2 2020 due to the first lockdown.
  • The level of GDP in the UK is now 8.7% below where it was prior to the pandemic at the end of 2019. Compared with the same quarter a year ago, when the initial economic impacts of the COVID-19 pandemic began to show, the UK economy remains 6.1% smaller.
  • On a monthly basis, GDP rose 2.1% in March, the fastest monthly growth rate since last August, boosted by schools reopening, strong construction activity and a pick-up in retail sales.

UK GDP fell by 1.5% in the first quarter of 2021 but rebounded in March (+2.1%)

Source: ONS

GDP breakdown by sector

Services

  • In Q1 2021, the services sector saw the largest contraction (-2.0%) and is now 8.7% below Q4 2019 levels before the pandemic began.
  • Within the services sector, accommodation and food services fell by 18.2% in Q1 2021, reflecting the closure of hotels and restaurants throughout the period.
  • The wholesale and retail sector fell by 5.9%, while personal service activities, which includes hairdressers, fell by 15.8% as lockdown restrictions hit consumer-facing sectors.
  • Health was one of the few services sectors to record growth, up 1.8%, driven by the NHS Test and Trace service and COVID-19 vaccine rollout.
  • Activity in the services sector did strengthen in March, growing 1.9%, as some restrictions began to ease, notably the reopening of schools and the return of outdoor gatherings (rule of six), both of which boosted retail sales over the month.

Manufacturing

  • Manufacturing output fell by 0.7% in Q1 2021. In comparison with levels before the pandemic, the manufacturing sector is 3.4% below Q4 2019 levels.
  • The weakness in manufacturing output was driven by an 8.5% decrease in manufacturing of transport equipment, which was only partially offset by a 5.6% increase in manufacturing of pharmaceutical products.
  • In March, the manufacturing sector returned to growth, rising 2.1%. Eleven out of the thirteen manufacturing sub-sectors grew with the largest positive contribution coming from the manufacturing of machinery and equipment (up 8.3%) and manufacturing of computer, electronic and optical products (up 5.5%).

Construction

  • The Construction sector grew by 2.6% in Q1 2021, but remains 3.4% below pre-pandemic levels in Q4 2019.
  • The rise in output in the first quarter of this year was mainly because of strong  growth in March (5.8%) – fastest growth in construction since July 2020 after the first UK lockdown.
  • Increased new work, delayed projects returning to sites and a general increase in confidence across the industry, as well as unusually warm weather, were all cited as reasons for the sharp pick-up in construction activity.

Source: ONS

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