UK economy shrinks by 2.6% in November
Data from the ONS has revealed that the UK economy shrunk by 2.6% in November due to lockdown restrictions. Although the closure of businesses such as pubs, hairdressers and non-essential retail saw a drag on growth, the impact to the economy was significantly less than the 20% fall seen during the first lockdown.
The reduced shrink suggests that the UK economy is adapting to pandemic restrictions, and will fall less than expected during the current lockdown. The reduced shrink also suggests that the UK economy will have a larger bounce back than previously anticipated, with many sectors, such as car manufacturing, housebuilding and infrastructure continuing to grow and exceed pre-pandemic levels.
The UK’s tech and investment scene also remains strong, with a near-record year of international investment, with $10.5bn poured into the capital’s startup scene in 2020. Although slightly down on 2019’s investment ($10.7bn), the figure was almost double 2018’s investment ($5.9bn) The investment figure places the UK as 5th in the world for VC tech investment, and second fastest growing global tech hub.
Outside investment was another key source of income in 2020, including investment from emerging markets, such as India. India was the second largest source of foreign direct investment (FDI) into the UK in the 2019-2020 financial year, and can be a great investor into the country going forward.
Gaurav Singh, founding partner at JPIN VCATS, the biggest UK-India investment platform, comments on the economic outlook: “Although the news that the UK economy shrunk may seem negative, it’s positive that many sectors of the UK saw growth. This bodes well for financial recovery, and suggests that growth will return when lockdown restrictions are lifted.
Finance and tech are likely to be big drivers of the economy going forward, and international investment will be key. The UK should make sure the doors remain open to foreign investment – the government should be focusing on building relationships, brokering trade deals, and increasing investment between our nations, helping the economy to recover and secure the UK’s place on the world stage.”
