The UK economy grew 2.1% in March despite lockdown and falling 1.5% in the first part of the year
THE UK economy grew by 2.1% in March despite the third coronavirus lockdown causing many businesses to temporarily shut.
It comes after Gross Domestic Product (GDP) fell by 1.5% in the first part of the year when Covid-restrictions limited the usual New Year spending.
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The monthly rise from February to March was stronger than expected, indicating a sharp bounce-back as restrictions finally begin to ease.
The latest data from the Office for National Statistics (ONS) suggests the UK weathered the third lockdown better than the first, although it added the reopening of schools and solid spending helped drive the recovery.
The research supports the Bank of England's prediction that the economy could grow at the fastest rate since World War II, expanding by 7.25% by the end of the year if all Covid restrictions are removed.
However, despite the rise, the economy remained 5.9% below its level in February 2020 and 8.7% smaller than before the pandemic.
What this means for your personal finances
GROSS domestic product (GDP) is one of the main indicators used to measure the performance of a country's economy.
When GDP goes up, the economy is generally thought to be doing well although today's figures aren't as strong as hoped.
Negative growth often brings with it falling incomes, job cuts and lower consumption.
The Bank of England (BoE) uses GDP as one of the key indicators when it sets the base interest rate.
This decides how much it will charge banks to lend them money, and is a way to try to control inflation and the economy.
So, for example, if prices are rising too fast, the BoE could increase that rate to try to slow the economy down. But it might hold off if GDP growth is slow.
The BoE cut interest rates twice in March due to coronavirus.
Base rate cuts means mortgage borrowers now typically benefit from lower rates, but at the other end of the scale savers earn less on their savings.
To measure GDP, the Office for National Statistics (ONS) collects data from thousands of UK companies.
Andrew Wishart, UK economist at Capital Economics, told The Sun the full impact of the crisis on jobs and businesses will only become apparent once the government starts to withdraw its support.
The research firm expects unemployment to double from 4 per cent to 8 per cent, with the same number of companies likely to go bust.
Darren Morgan, ONS director of economic statistics, said: "The strong recovery seen in March, led by retail and the return of schools, was not enough to prevent the UK economy contracting over the first quarter as a whole, with the lockdown affecting much of the services sector."
Construction output grew strongly in the first three months of the year, even performing better than pre-pandemic levels by March.
Manufacturing also jumped in March, despite an initial fall at the start of the year as businesses continued to adapt to make them Covid-secure.
The ONS said exports of goods to the European Union are now almost back to their December levels, after a fall following Brexit.
However, it added imports from the EU "remained sluggish" in the first three months of the year and were outstripped by non-EU imports for the first time on record.
"Promising sings of things to come"
Chancellor Rishi Sunak said: "Despite a difficult start to this year, economic growth in March is a promising sign of things to come.
"Even with this positive news, we know that many businesses and people still need our help, and that's why I want to reassure everyone today that our plan for jobs will continue to create, support and protect jobs in the coming months."
The UK's economic fall out from the pandemic last year was the worst among all of the G7 group of major advance economies.
But this time, the lockdown was bolstered by the vaccine rollout and the extension of support announced in the Budget.
Both factors have played a significant role in boosting confidence.
Tom Stevenson, investment director for personal investing at Fidelity International said: "Britain’s economy is recovering lost ground with each step out of lockdown.
"Signs are cautiously positive that output will return to pre-pandemic levels by the end of the year, but we are not out of the woods just yet."
Rory Macqueen, Principal Economist at NIESR, said today's figures show that "clearly much of the economy has adapted to cope with Covid-19 restrictions".
He added: "If the vaccine programme and lifting of restrictions continue on schedule this provides a firm basis for continuing growth in the second quarter and 2021 overall."
Even though the economy grew in March, inflation also rose to 0.7% due to rising fuel and clothes prices.
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It came after a rise to 0.4% in February and 0.7% in January.
Before the latest lockdown restrictions were introduced, the economy was expected to grow in the first quarter of 2021.