Despite the disruption caused by Omicron in December, the economy kept growing in the final quarter of last year, according to the latest ONS figures.
UK gross domestic product rose by 1.0% in October-December following a downwardly revised 1.0% increase in Q3.
The ONS said: “The largest contributors to this quarterly increase were from human health and social work activities driven by increased GP visits at the start of the quarter, and a large increase in coronavirus (Covid-19) testing and tracing activities and the extension of the vaccination programme.”
On a quarterly basis, that leaves GDP 0.4% below its level in Q4 2019.
Antonia Medlicott, finance editor at the financial comparison website, InvestingReviews.co.uk, said: “The Omicron variant savaged the retail sector in December.
“The UK’s high streets became ghost towns and that’s reflected very clearly in the December GDP data.
“Markets have long had this priced in but things are now getting worse, not better.
“The Omicron variant has given way to soaring inflation, rising interest rates and raw material costs, skyrocketing energy bills and looming tax rises. Brexit fallout is also starting to bite.
“We are now at the business end of the pandemic and, to make matters worse, businesses are now having to stand on their own two feet, with little if any Government support.
“Volatility in UK and global markets is set to be the defining narrative of 2022 as a variety of major macroeconomic pain points converge.
“This ISA season is going to leave a lot of investors scratching their heads as to where, and in what asset class, to invest. The level of uncertainty is off the scale.”
Steve Clayton, fund manager at HL Select, added: “Ask any retailer, publican or restauranteur what the” B” in Plan B stood for and you’re likely to get a pretty robust response. The impact of the Omicron variant might have been less in terms of overall economic activity than earlier variants, but it still knocked the consumer sectors badly, just as they were starting to claw back lost ground.
“In contrast, the healthcare sector was pushing output ahead, just as well perhaps in the circumstances.
“The ONS highlight the positive boost that came from a £1.1bn monthly pick-up in the pace of NHS Track & Trace and vaccinations.
“Production sectors like manufacturing, utilities and quarrying pushed output ahead by 0.3%, but only the water industry has output ahead of its pre-pandemic level.
“Construction was a bright spot, rising by 2%, but given November’s original estimate of almost double that pace was revised down sharply, perhaps it’s too soon to celebrate, even if the overall level of industry output is now back to just above the pre-pandemic level.
“If we look at the year as a whole, UK output grew by 7.5%, the fastest clip since WW2. Don’t get carried away though, because 2020 was easily the worst year for the economy and taken as a whole, it has been a pretty disastrous period for economic growth.
“Longer term, the UK’s biggest challenge still seems to be productivity growth, which has been lack-lustre for over a decade. Until that is fixed the UK economy is likely to have a pretty humdrum underlying pace of growth.”
