UK economy contracted by 1.6% as people saved at record levels, figures show

Britain’s economy suffered a bigger hit than first thought between January and March as the coronavirus lockdown took its toll and households saved at record levels, according to official figures.

The Office for National Statistics (ONS) said gross domestic product (GDP) – a measure of the size of the economy – contracted by 1.6% in the first quarter, compared with the previous estimate of 1.5%.

This means GDP was 8.8% below its pre-pandemic levels at the start of the year, against the 8.7% initial estimate.

The ONS said households slashed their spending and instead piled cash into savings, with the household saving ratio increasing to 19.9%, compared with 16.1% in the previous three months.

It is the second highest figure on record, beaten only by the 25.9% seen in the second quarter of 2020.

Jonathan Athow, deputy national statistician at the ONS, said: “Today’s updated GDP figures show the same picture as our earlier estimate, with schools, hospitality and retail all hit by the reimposition of the lockdown in January and February, with some recovery in March.

“With many services unavailable, households again saved at record levels with only last spring seeing more saved.”