The U.K. economy contracted by 1.5% in the first quarter of 2021 as nationwide lockdown measures continued to weigh on activity, preliminary estimates revealed on Wednesday.
Economists polled by Reuters had expected GDP to shrink by 1.7%, with stringent restrictions having been in place throughout the first three months of the year as the country tried to contain spiraling Covid-19 cases.
However, with lockdown measures now being phased out and the economy reopening, the country is expected to see a sharp rebound for the remainder of the year.
The International Monetary Fund expects U.K. GDP to grow 5.3% in 2021, partially recovering from last year when the economy saw its largest annual contraction since the Great Frost of 1709.
Prime Minister Boris Johnson announced Monday that the next stage of lockdown easing will go ahead as planned on May 17, with international travel permitted in most circumstances and hospitality venues allowed to welcome customers indoors, a lifeline for the country’s dominant services industry.
The economy grew 2.1% month-on-month in March, slightly exceeding expectations, and the level of GDP now sits 8.7% below its pre-pandemic level at the end of 2019, according to the Office for National Statistics. On a year-on-year basis, GDP shrank by 6.1% in the first quarter.
Both services and production output contracted over the first quarter, but construction output grew.