UK economy picks up as lockdown restrictions ease

The UK economy shrank by 1.5% in the first three months of 2021, but gathered speed in March as lockdown restrictions began to ease, official figures show.

The reopening of schools and strong retail spending helped the economy grow 2.1% in March, its fastest monthly growth since last August.

But the economy is still 8.7% smaller than where it was before the pandemic.

The figures marked a possible turning point for the economy, analysts said.

Tej Parikh, chief economist at the Institute of Directors, predicted the UK economy was now on course for a bumper bounce-back this year.

"The first quarter should mark the low point for the economy in 2021," he said. "The lockdown, and added costs of navigating new trading terms with the EU, limited many businesses' trading activities at the start of the year."

Chancellor Rishi Sunak told the BBC the economy was "getting back on track."

"Despite a difficult start to this year, economic growth in March is a promising sign of things to come," he added.

Earlier this month, the Bank of England said it expected the UK economy to enjoy its fastest growth in more than 70 years this year as restrictions are lifted.

But Pantheon Macroeconomics economist Samuel Tombs pointed out that the UK's economic growth was still the slowest of the Group of Seven (G7) rich countries, for the fourth quarter in a row.

Mr Tombs said GDP looked on course to grow by 5% between April and June "which should mean that the UK finallyhands over the wooden spoon to another G7 economy," he added.

Official trade figures published at the same time showed a shift away from EU countries since Brexit.

"Imports from Europe remained sluggish in the first three months of the year, being outstripped by non-EU imports for the first time on record," said Mr Morgan.

The ONS said the total trade deficit, excluding precious metals, narrowed by £8.4bn to £1.4bn.

The vaccine rollout, the extension of support measures at the Budget, and the roadmap to reopen the economy has helped build directors' confidence for the months ahead, analysts said.

Suren Thiru, head of economics at the British Chambers of Commerce, said the decline in economic output in the first quarter largely reflected the squeeze on activity from coronavirus restrictions, which was partly offset by growing business resilience to those restrictions and a monthly boost from the reopening of schools in March. 

"The first quarter decline should be followed by a robust rebound in the second quarter as the effects of the release of pent-up demand, as restrictions ease and the strong vaccine rollout, are fully felt," he said.

But he warned that the longer-term economic damage caused by coronavirus may mean the recovery is slower than many, including the Bank of England, currently predict.