GDP shrank by 9.9 per cent last year amid Covid-19 lockdowns, marking the largest annual fall in UK GDP on record, according to the Office for National Statistics (ONS).

The ONS said the contraction in 2020 was more than twice as much as the previous largest annual fall on record.

Real gross domestic product (GDP) increased by 1.2 per cent in December 2020, following a revised 2.3 per cent decline in November, when there were more extensive restrictions to activity.

The pre-Christmas growth means the UK economy looks set to avoid what could have been its first double-dip recession since the 1970s. During December, a period of eased restrictions early in the month was followed by tighter restrictions to activity across all four nations of the UK later in the month.

December GDP is 6.3 per cent below the levels seen in February 2020; this compares with 7.4 per cent below pre-pandemic levels in November 2020.

Ed Monk, associate director of personal investing at Fidelity International, said: “The threat of a double-dip has been avoided thanks to a rebound in food and accommodation services after the second lockdown of 2020 was lifted early in December. 2021 may still begin with falling growth following the imposition of new restrictions since Christmas, but it appears the 1 per cent rise in the fourth quarter of 2020 will be large enough that we won’t now see a return to recession.

“With no end date planned for the current restrictions, the road ahead still looks bumpy and the 9.9 per cent fall in GDP last year was the worst on record. However, markets seem willing to look through this and have been boosted as of late by vaccine optimism. Investors and policymakers alike will be hoping that the speed of the vaccine rollout will continue to inject some health back into the UK economy. The prime minister’s speech on 22nd February will be hotly anticipated for a clearer picture of the path out of lockdown and what this might mean for Britain’s economic outlook.”

Adrian Lowcock, head of personal investing at UK investment platform Willis Owe, said: “The headline rate is high, but this is not surprising given how much disruption we saw it 2020. What is crucial is what comes next, and we expect activity and pent-up demand to help the UK economy bounce back as restrictions are eased.

“Businesses have already adapted to this new way of living, and with the additional stimulus and support from the government we could see resurgent growth this later year and in 2022. For investors, GDP numbers do not lead the stock market, so there is no call to panic and change long-term investment plans. Indeed, there are still plenty of opportunities for investors in this environment.”