GDP monthly estimate, UK: January 2021

• UK gross domestic product (GDP) is estimated to have fallen by 2.9% in January 2021, as government restrictions reduced economic activity.

• Falls in consumer-facing services industries and education drove a contraction of 3.5% in the services sector in January 2021.

• Output in the production sector fell by 1.5% in January 2021, after manufacturing contracted for the first time (by 2.3%) since the initial pandemic-driven fall in output in April 2020.

• The construction sector grew by 0.9% in January 2021, driven by growth in new work.

• January’s GDP was 9.0% below the levels seen in February 2020, compared with 4.0% below October 2020 (the initial recovery peak).

Monthly real gross domestic product (GDP) is estimated to have fallen by 2.9% in January 2021 following growth of 1.2% in December 2020. Restrictions were in place to varying degree across all four nations of the UK during January. Restriction announcements for each nation are available:

• England
• Scotland
• Wales
• Northern Ireland

The output approach to GDP shows that January’s level was 9.0% below that seen in February 2020 and was 4.0% below levels seen in October 2020, the initial recovery peak. Overall, all main sectors of GDP remained notably below their pre-pandemic (February 2020) levels and all were lower than in October 2020.

The services sector acted as the main drag on growth in January, decreasing by 3.5% as restrictions on activity were reintroduced in response to the coronavirus (COVID-19) pandemic. The services sector was 10.2% below the level of February 2020 compared with 4.9% below the level seen in October 2020.

The production sector fell by 1.5% in January 2021 following eight months of consecutive growth. The sector was 5.0% below its February 2020 level.

The construction sector saw positive growth of 0.9% in January, after a decline of 2.9% in December 2020. The construction sector was 2.6% below the level of February 2020.

The service sector saw falls in 9 of the 14 sub-sectors between December 2020 and January 2021. The largest contributor to the fall was wholesale and retail trade, followed by education services, accommodation and food service activities, and other service activities such as hairdressing, because of the reintroduction of restrictions across the UK. There was growth in five sub-sectors, most notably in health activities, and information and communication services. Within the production sector, manufacturing contracted by 2.3% in January, the first decline in this sub-sector since April 2020.

Looking ahead, initial results from Wave 25 of the Business Insights and Conditions Survey (BICS) found that the percentage of currently trading businesses experiencing a decrease in turnover in mid-February 2021, compared with normal expectations for this time of year, has fallen by 2 percentage points since early February (Wave 24), to 44%. This was last lower in mid-December 2020 (Wave 21) when it was 42%.

The monthly growth rate for GDP is volatile. It should therefore be used with caution and alongside other measures, such as the three-month growth rate, when looking for an indicator of the medium-term trend of the economy. However, it is useful in highlighting one-off changes that can be masked by three-month growth rates.

GDP contracted by 1.7% in the three months to January 2021, down from a 1.0% growth in the three months to December 2020.  

Figure 4 shows the performance of total services output, a composite industrial indicator based on output in consumer-facing services, and output in all other industries in the services sector. In January 2021, consumer-facing services such as trade of motor vehicles and retail trade as well as food and beverage services weakened as restrictions were reintroduced across the UK. Unlike the impact of restrictions imposed in November, education services were also affected by the January restrictions. The education sector contracted by 16.3% in January 2021; the second largest contributor to the monthly decline. While remote learning activities are included for the education sector, the estimated output from these is lower than pre-pandemic classroom-based learning, as described in our School’s Out: measuring education output in the summer of the pandemic blog post.

Health had a large contribution to growth in January 2021, increasing by 8.7%, mainly through coronavirus testing and tracing and vaccine schemes across the UK. Adjustments for these programmes increased overall GDP by 0.9 percentage points in January 2021; some of these adjustments are in other industries than health. More information is available in Section 8: Measuring the data.

Services output contracted by 2.4% in the three months to January 2021. This was driven by decreases in consumer-facing industries, most notably accommodation and food service activities and wholesale and retail trade, which combined contributed negative 1.91 percentage points to headline GDP.

Production declined by 1.5% in January 2021 with contractions in two out of the four sub-sectors. The manufacturing sub-sector contracted by 2.3%, the first decline since April 2020, largely driven by a fall in exports. 9 out of the 13 manufacturing sub-sectors declined; the largest negative contribution came from the manufacture of transport equipment sector which contracted by 11.1%. This was driven by a decrease in the manufacture of motor vehicles industry of 16.9%.

Mining and quarrying continued to decline, decreasing by 0.7% in January 2021. Oil and gas extraction has seen large declines since June 2020, mainly due to tightened restrictions impacting on demand. Electricity, gas, steam and air conditioning supply increased by 0.9%, while water supply increased 1.2% in January 2021.

Output in the production sector grew by 0.7% in the three months to January 2021. This was driven by increases in two out of the four sub-sectors, most notably in manufacturing following growth in both November and December 2020.

Construction output grew by 0.9% in January 2021 following a fall of 2.9% in December 2020. The monthly growth was driven by a rise in new work of 1.7% offset by a small contraction in repair and maintenance of 0.4%.

The growth in new work was driven by private commercial and infrastructure which grew by 4.5% and 3.1% respectively.

Despite recovering to its pre-pandemic (February 2020) levels in the November 2020 release, at January 2021 the construction sector was 2.6% below February 2020.

The construction sector grew by 1.7% in the three months to January 2021. The main contributors were infrastructure, non-housing repair and maintenance and private new housing, which grew by 7.4%, 4.1% and 2.7% respectively.

Contribution to growth

Contribution to growth indicates how many percentage points a sector or industry is adding or removing from a given growth rate, usually headline GDP growth.

Gross domestic product (GDP)

A measure of the economic activity produced by a country or region. Gross domestic product (GDP) growth is the main indicator of economic performance. There are three approaches used to measure GDP:

• the output approach
• the expenditure approach
• the income approach

Index numbers

Data relative to a given base value, which typically refers to a year.

Rolling three-month growth

Rolling three-month growth takes the average level of three consecutive months (for example, April, May and June), and compares it with the average level of the previous three months (for example, January, February, and March). The rolling three-month growth rate is often used alongside the monthly growth rate, as the latter can be more volatile.

For further definitions, please see the Glossary of Economic Terms.

Revisions

This release gives data for January 2021 for the first time and is only open for changes within this month.

Coronavirus (COVID-19)

This release captures the direct effects of the coronavirus (COVID-19) pandemic and the government measures taken to reduce transmission of the virus. We have faced an increased number of challenges in producing monthly and quarterly estimates of UK gross domestic product (GDP). More detailed information on the challenges and the steps taken to mitigate those can be found in Coronavirus and the effects on UK GDP.

As a result of these challenges, GDP estimates for January 2021 are subject to more uncertainty than usual.

Early in the pandemic we face some challenges in timely responses to the monthly business survey as businesses adapted to new conditions. In recent months response rates have improved and are shown for the latest months in Table 2.

Adjustments for testing and tracing and vaccine programmes in the UK

An adjustment has been applied to the data for the impact from testing and tracing, and vaccines programmes. The January adjustment across all industries for vaccines, in volume terms, is £400 million, and for testing and tracing is £3,200 million. The equivalent total December 2020 combined adjustment for vaccines, and testing and tracing was £2,200 million. While some vaccinations were given in December 2020, activity did not become significant in scale until 2021, and testing and tracing continued to grow during January as well. The additional activity in January 2021 over December 2020 in both the vaccines and testing and tracing programmes has added 0.9 percentage points to GDP growth in January 2021. Not all of this extra activity will be seen in the output of the health industry as there are other industries involved in the production of the vaccines and various testing kits, as well as a number of service industries involved in the logistical process of delivering the programmes. These very approximate initial estimates are informed by available in-year spending data for testing and tracing; the available estimated cost to secure and manufacture vaccines for the UK and deploy vaccines in England; available testing and vaccination data and estimated imports. These are early estimates that we will continue to refine in future publications.

End of EU exit transition period

As the transition period has ended and the UK enters into a new Trade and Cooperation Agreement with the EU, the UK statistical system will continue to produce and publish our wide range of economic and social statistics and analysis. We are committed to continued alignment with the highest international statistical standards, enabling comparability both over time and internationally, and ensuring the general public, statistical users and decision makers have the data they need to be informed.

Additionally, the Withdrawal Agreement outlines a need for UK gross national income (a fundamental component of the national accounts, which includes GDP) statistics to remain in line with those of other EU countries until EU budget contributions are finalised for the years in which we were a member, and making budget contributions during the transition period. To ensure this comparability during this period, the national accounts will continue to be produced according to European System of Accounts (ESA) 2010 definitions and standards until at least 2024.

As the shape of the UK’s future statistical relationship with the EU becomes clearer over the coming period, the Office for National Statistics (ONS) is making preparations to assume responsibilities that as part of our membership of the EU, and during the transition period, were delegated to the statistical office of the EU, Eurostat. This includes responsibilities relating to international comparability of economic statistics, deciding what international statistical guidance to apply in the UK context and to provide further scrutiny of our statistics and sector classification decisions.

In applying international statistical standards and best practice to UK economic statistics, we will draw on the technical advice of experts in the UK and internationally, and our work will be underpinned by the UK’s well-established and robust framework for independent official statistics, set out in the Statistics and Registration Service Act 2007. Further information on our proposals will be made available later this year.

Communicating gross domestic product

Recent analysis explains our latest position on how we are looking to communicate GDP, including how we will continue to acknowledge that “technical” recessions are comprised of at least two consecutive quarters of contracting GDP.

While it is still true that these early estimates are prone to revision, we prefer to focus on the magnitude of the contraction that has taken place during the coronavirus (COVID-19) pandemic. It is clear that the contraction in GDP in Quarter 2 (Apr to June) 2020 was in the largest recession on record. Our latest estimates show that the UK economy is now 9.0% smaller than it was in February, the effects of which have been most pronounced in those industries that are most exposed to public health restrictions and the effects of social distancing.

Quality and methodology information on strengths, limitations, appropriate uses, and how the data were created is available in the Gross domestic product (GDP) QMI.