Coronavirus and the impact on output in the UK economy: November 2020

• Monthly gross domestic product (GDP) fell by 2.6% during November 2020 and was 8.5% below February 2020 levels.
• November 2020 saw the first monthly fall since April 2020 as business restrictions impacted economic activity.
• Across services, the monthly fall was widespread but driven by accommodation and food and beverage services, wholesale, retail and motor trades, other service activities, and arts, entertainment and recreation.
• Within production, manufacturing grew but this was offset by falls across mining and quarrying, energy and water and waste.
• Construction output in November 2020 was 0.6% above February 2020, with repair and maintenance work 7.4% above and new work 3.1% below its pre-pandemic level.

This article analyses the overall impact of the coronavirus (COVID-19) pandemic on the output approach to gross domestic product (GDP) during November 2020, providing an in-depth insight into the impacts of the coronavirus pandemic on the UK economy.

Monthly GDP in November 2020 was 8.5% below the level of February 2020, having fallen by 2.6% compared with October 2020. The three largest falls in monthly GDP, since records began in January 1997, have all occurred in 2020:

• 18.8% April 2020
• 7.3% March 2020
• 2.6% November 2020

During November, business activity was restricted to varying degrees across each of the four nations to slow the spread of COVID-19 infections.

Restriction announcements for each nation can be found in the following links:

1. England
2. Northern Ireland
3. Scotland
4. Wales

This impacted growth at industry level and respondent evidence suggested this was most significant in some services industries and drinks manufacturing.

The falls seen in output in many industries in November were not as large as those seen in April and March, when significant lockdown restrictions were also in place. This is partly as businesses found ways to adapt to the restrictions. However, the falls in November should also be interpreted in the context of recent moves - in some cases activity was already at levels much lower than they were pre-pandemic. It is therefore important to compare output to pre-pandemic levels as well as looking at the monthly change.

The most recent month reflects movements across construction, manufacturing and services.¹ For more details, please see GDP monthly estimate, UK: November 2020.

The output of:

• services industries remained 9.9% below the level of February 2020, decreasing by 3.4% in the latest month
• production industries remained 4.7% below the February 2020 level, decreasing by 0.1% in the latest month
• manufacturing industries remained 4.9% below the February 2020 level, increasing by 0.6% during November 2020
• the construction industry has recovered to 0.6% above the February 2020 level, increasing by 1.9% in the latest month

Services

Within services, the monthly fall of 3.4% was the third biggest fall since monthly records began in January 1997. The largest negative growth was a fall of 17.0% in April 2020, while March 2020 declined by 7.9%.

The percentage of businesses reporting no turnover from our survey for November 2020 was 8.1%, an increase on the 7.1% reported in October 2020. At a more detailed level, there were notable increases in business reporting no turnover with the proportion in hair and beauty (within personal services) growing from 2.5% in October to 24.4% in November. Similar data for pubs showed an increase from 9.0% to 27.4%.

The decline in the accommodation and food and beverage services sector was supported by the data from our Business Insights and Impact on the UK economy publication, which showed that 44.5% of businesses during Wave 19 (16 November to 29 November) reported a decrease in excess of 50% in their expected turnover for that time of year compared with 32.2% of businesses during Wave 17 (19 October to 1 November).

In November 2020, 8 of the 51 lower level services industries surpassed their level of output compared with February 2020, led by postal and courier services. In contrast, six services industries remain below 50% of their February 2020 level, with air transport and travel agents performing the weakest.

Manufacturing

Manufacturing recorded its seventh consecutive monthly growth, boosted by car production. There was also a positive contribution from exports.

In November 2020, 16 of the 44 manufacturing industries surpassed their level of output in February 2020, led by other chemicals, wood and paints. Four industries failed to reach 80% of their February 2020 level of output, with aircraft maintenance performing the weakest.

Notes: The UK economy during the coronavirus (COVID-19) pandemic

1. Services comprise 79.0% of the UK economy, while production (including manufacturing) and construction comprise 13.9% and 6.4% respectively.

The output of services industries fell by 3.4% during November 2020 and was 9.9% below the level of February 2020. This is the third largest monthly fall in services since records began in January 1997.

All 14 subsectors declined during November (Figure 2), led by accommodation and food service activities, wholesale, retail and motor trades, arts, entertainment and recreation and other service activities. These four sectors accounted for nearly 80% of the fall in services.

Wholesale and retail trade: repair of motor vehicles

Retail fell by 3.8% during November 2020 (see Retail sales, Great Britain: November 2020), with output 2.8% above February 2020 levels for the industry.

Motor trades fell by 17.2% in November 2020, with output 20.8% below February 2020 levels. In comparison to the first lockdown, which saw motor trades fall by 90.9% during April 2020, this industry has been far more resilient. This is likely a result of the industry being more prepared to adapt to the new restrictions than it was during the first lockdown, through online sales, virtual showrooms and click and collect.

Wholesale (excluding motor vehicles) fell by 3.0% during November 2020 but remained 6.5% below February 2020 levels.

Accommodation and food and beverage services

This sector decreased by 44.0% in November 2020 following a fall of 13.8% in October. This resulted in output in the latest month being 63.6% weaker than the February 2020 level.

Food and beverage services, which includes restaurants, cafés, takeaways, pubs, canteens and catering, fell back by 39.8% in November 2020. This followed a fall of 10.6% during October 2020. There were modest widespread falls across all sub-industries, but the dominant fall came from pubs, which saw a significant fall in turnover of 78.1% at current prices, seasonally adjusted compared with a rise of 2.0% during the same period in 2019 (Figure 3). We received anecdotal evidence that trading restrictions had a negative impact on output and 27.4% of returns from pubs reported no activity. Despite this large decline, in comparison to the first lockdown the industry has performed better as whole. This is due to the resilience in the catering section that remained open with workplace and school catering continuing, which it did not in the lockdown in April 2020. Additionally, some restaurants and pubs have increased their takeaway provision during the November lockdown. However, the industry was 58.9% below its February 2020 level in November.

Hotels and accommodation similarly fell by 55.8% during November 2020 with consistent large falls across hotels, camping and caravan sites and other accommodation and was 74.8% below its February 2020 level. This was less than the decline of 84.7% seen in April during the first lockdown and was largely due to more resilience from the rented holiday accommodation component, such as lodges and cottages.

Arts, entertainment and recreation

This sector saw a decline of 14.0% in November 2020 and was 36.7% below its February 2020 level. This decline was led by a fall in sports activities and amusement and recreation activities which fell by 20.8% in November 2020. In comparison with the first lockdown in April 2020, which saw a fall of 41.9%, some sports including elite football, continued during November.

Creative, arts and entertainment activities saw a decline of 19.3%. This industry is now 69.0% below its February 2020 level.

Other service activities

This sector saw a decline of 22.8% in November 2020. This was driven by a fall in Other personal service activities of 35.3% led by hair and beauty. In contrast, funeral directors were broadly flat. There were also falls in activities of membership organisations and repair of computers and personal and household goods of 2.1% and 11.7% respectively. This sector is now 31.6% below February 2020 levels.

Transportation and storage

This sector saw a decline of 0.6% in November, with output now 12.4% below February 2020 levels. This was the first decline in this sector since April 2020 but not universal across the industry.

The decline in this sector was led by rail transport with a fall of 29.0%. Land transport also fell by 2.2%, largely because of reduced demand for passenger transport with freight being more resilient. The largest decline in this industry came from air transport, which fell by 40.5% in November 2020. However, the output level of air transport was already very weak during October, with November 91.0% below the February 2020 level. Consequently, the impact from this fall is less than it was during the first lockdown.

These falls were offset by strength in warehousing and support activities for transportation and postal and courier activities; which grew by 2.5% and 2.7% respectively. This strength was driven by increased online retail activity during this period, due to Black Friday and the build-up to Christmas.

Professional, scientific and technical activities

This sector fell by 0.8% in November 2020 and is 6.7% below its February 2020 level. There were declines in scientific research and development, which fell by 5.6%, following a strong October 2020; other professional scientific and technical activities, which fell by 7.3%; and architectural and engineering activities, which fell by 2.3%. Weakness was widespread within those industries.

These falls were partially offset by widespread growth in legal activities and accounting, bookkeeping and auditing activities; tax consultancy, which grew by 1.2% and 1.7% respectively. Growth in legal activities may be linked to strong levels of housing completions. The growth in accounting was powered by strong growth in the large businesses within this industry.

There was also strong growth in advertising and market research which grew by 2.1%, driven by an increase in demand for advertising relating to the pre-Christmas and Black Friday period.

Other notable growth

Employment activities performed better under the current restrictions than in the first lockdown falling by 0.4% in November 2020 compared to a fall of 23.9% in April 2020. This is because of increased demand from schools, warehousing, retail and health, when compared to the first lockdown.

Real estate activities on a fee or contract basis fell by 2.9% in November 2020. In comparison it fell by 27.3% in April 2020. This resilience may have been positively influenced by the changes in stamp duty and strong house completions during the month of November.

Education fell by 1.3% in November 2020, this decline is related to a decrease in attendance in the month of November compared to October, education did not see the falls seen in the first wave of the pandemic with the education provision broadly unaffected by new restrictions. This sector is now 7.6% below February 2020 levels.

Human health and social work activities fell by 0.5% in November 2020. This sector is now 11.2% below February 2020 levels. This fall was driven by falls in residential care activities, and social work activities without accommodation, which fell by 1.4% and 1.7% respectively. This decline was slightly offset by 0.1% growth in human health activities.

Production output decreased during November 2020 by 0.1%, with negative contributions from mining and quarrying; electricity and gas; and water and waste, offset by a positive contribution from manufacturing (Figure 5).

Production output during November continued to be affected by the coronavirus (COVID-19) pandemic, and it was 4.7% below the level of February 2020, the last full month of “normal” operating conditions.

During November 2020, production output decreased for the first time since April 2020, primarily because of the fall from mining and quarrying, which has declined since July 2020. This factor has placed a drag on growth in production since July, contributing to a slowdown in the recovery over recent periods (Figure 6).

In contrast, manufacturing output grew during November 2020 by 0.7%, with 8 of the 13 subsectors displaying modest upward contributions, led by transport equipment (Figure 7).

Despite being the seventh consecutive monthly growth since April 2020, manufacturing output was 4.9% below the level of February 2020.

As lockdown restrictions were eased, the manufacturing sector started to recover and displayed stronger than usual growth during May, June and July 2020. In contrast, the recovery during August to October continued at a slower pace, despite a comparatively limited number of lockdown restrictions impacting output.

During November, amid the nationwide lockdown across England and restrictions across the rest of the UK, responder led evidence suggested that the production of alcoholic beverages and soft drinks did suffer because of reduced demand from the hospitality sector. However, across the rest of manufacturing there was no evidence of a significant impact on output as most businesses continued to trade, primarily because of the health and safety measures put in place during the early months of the pandemic.

To highlight business resilience during November, our weighted Business Impact of Coronavirus (COVID-19) Survey (BICS) Wave 17, indicated that between 2 November and 15 November 2020, 90.2% of businesses in the manufacturing sector were currently trading and had been for more than the last two weeks.

Additionally, the percentage of nil returns from our Monthly Business Survey (MBS) during November, increased by just 0.1% compared with October, indicating that businesses continued to trade.

When analysing growth across manufacturing for current price seasonally adjusted export and domestic turnover, both variables moved in a broadly similar way throughout the pandemic (Figure 8). However, looking back there was a stronger decline in export turnover compared with domestic growth during March 2020, mainly because of the significant worldwide impact on supply chains. This was followed by varied rates of recovery from May to July, following the re-opening of UK and worldwide supply chains amid the easing of lockdown restrictions.

During November 2020, export growth was comparatively stronger than domestic growth. We received anecdotal evidence that some businesses had been stockpiling, in advance of the UK’s transition period with the European Union (EU) ending on 31 December 2020.

Given the continued impact of the pandemic across production and manufacturing, we have highlighted the most interesting anecdotal evidence, both positive and negative, on subsector- and industry-level growth during November 2020, with focus also given to the recovery to February 2020 levels.

Food products

The food products industries were 2.7% weaker in November 2020 than in February 2020, with the other food products category (this includes sugar, tea and coffee processing, manufacture of prepared meals, condiments and seasonings) the hardest hit.

During November, output remained flat compared with October 2020 with negligible contributions to growth across all industries. The subdued nature of the growth across the sector is because of a variance in demand for food products, with falls from meat and meat products; bakery and other farinaceous products; and vegetable and animal oils and fats, offset by rises from other food products; dairy products; prepared animal feeds; and grain mill products, and starches and other starch products.

Those businesses supplying the food stores sector may have benefitted from a shift in consumer habits, leading to a rise in volume sales in food stores of 3.1% during November compared with February 2020, as reported by our latest Retail sales, Great Britain release. In contrast, some businesses facing the hospitality sector have been negatively impacted as a result of tightened restrictions for services such as bars and restaurants across the UK.

Alcoholic beverages and soft drinks

There was a monthly decline of 7.1% for this industry, with brewers of beer and lager hardest hit. Output was 17.3% weaker in November than in February 2020. The longer-term decline was mainly distillery focused, amid pressure on exports.

During November 2020, we received responder-led evidence that decreased output from both the alcoholic beverages and soft drinks industries, is reflective of a significant downturn in demand from the hospitality sector, because of tightened restrictions across the UK during November (Figure 9).

Wood and wood products except furniture

Continuing the strong upward trend since April 2020, this industry rose by 2.4% during November 2020.

Output strengthened to 10.1% above its February 2020 level, primarily because of increased demand from the construction sector amid the ongoing recovery and evidence of increased demand for DIY products as people spent more time making home improvements. Additionally, the latest Retail sales, Great Britain release highlights feedback from retailers, which suggested earlier purchases of Christmas products and home DIY goods in preparation for the festive season had boosted turnover in household goods stores during November.

Basic pharmaceutical products

The monthly fall of 2.9% was mainly because of the cumulative impact of weakness from large businesses and highlights the volatile nature of growth in the basic pharmaceutical products industry, following a rise of 1.4% during October 2020. Output during November was 0.3% below its February 2020 level.

Transport equipment

Sector-level growth of 2.3% during November 2020 continued the recovery, but this should be noted in the context of output being 13.0% weaker than in February 2020.

Monthly strength was because of an export led rise from motor vehicles, trailers and semi-trailers. This industry displayed a rise of 5.7% and resulted in output at 1.3% above the February 2020 level. However, this industry had declined prior to the pandemic, with output during November at 8.4% below the most recent peak in June 2019 (Figure 10).

Because of ongoing weak global demand, car production remained below normal levels. The Society of Motor Manufacturers and Traders (SMMT) reported that during November 2020, the total number of cars manufactured were only marginally below November 2019. However, year to date output for 2020 was 31.0% weaker than 2019.

The air, spacecraft and related machinery industry fell by 3.6% during November 2020, with output 35.3% weaker than in February 2020. As a result of the widely reported negative impact on global civil aviation, manufacturers facing this sector have been severely impacted. Continued uncertainty over worldwide travel and quarantine restrictions has impacted passenger numbers throughout the pandemic.

Electricity and gas supply

During November 2020, the sector level fall of 2.3% is driven by falls from both electricity and gas supply of 1.8% and 3.9% respectively. The decline is largely temperature driven with the Met Office reporting that the provisional UK mean temperature was 7.7 degrees Celsius, which is 1.5 degrees Celsius above the 1981-2010 long-term average, making it the sixth warmest November in a series from 1884 (PDF, 51KB).

Mining and quarrying

Sector level growth fell by 3.4% during November 2020. This was also the fifth consecutive monthly fall. Output remained 10.7% below February 2020, driven by a strong fall of 4.5% from oil and gas extraction. Note that this estimate is provisional based on lower than usual response, so maybe open to revision.

The decline in oil and gas extraction since June 2020 is because of a slump in oil prices amid tightened restrictions impacting on demand. This has resulted in output at 12.0% below its February 2020 level (Figure 11).

Construction output grew by 1.9% in November 2020 compared with October 2020, rising to £14,014 million. The monthly growth in November 2020 is the seventh consecutive month of growth since the record monthly decline of 40.7% in April 2020 and reverses the trend of slowing growth between June 2020 to October 2020.

All work construction output in November 2020 recovered above its pre-pandemic level for the first time, at 0.6% (£80 million) above the February 2020 level. While construction output is slightly above the February 2020 level it is still down by 0.3% (£40 million) on the level of output in January 2020 due to February being impacted by adverse weather.

The Monthly Business Survey (MBS) is the primary data source for 75% of production industries and 50% of services industries. This is an online questionnaire where businesses are asked to provide their turnover and, if they are within manufacturing, export turnover.

Survey response

Response by turnover for services industries in November 2020 was 82.3%, down on the 88.6% achieved in November 2019 (see Historical MBS (services) response rates).

Response by turnover for production industries was 80.7% in November 2020, down on the 89.8% achieved in November 2019 (see MBS (production) response rates).

The response by turnover for the construction industries for October 2020 was 70.2% (see Table 5 in the Construction output in Great Britain: November 2020 release). This is partially because data collection for the MBS for construction and allied trades has been transitioning to an online questionnaire since April 2020.

Other data sources

Other data are primarily sourced from the Office for National Statistics (ONS), for example, government expenditure, household expenditure and financial corporations expenditure, but also other bodies such as the Department for Transport, the Civil Aviation Authority and the Department for Business, Energy and Industrial Strategy. These account for 50% of services industries and 25% of production industries. We are also able to gain intelligence from these data providers regarding monthly changes in their data.

We also use the fortnightly Business Impact of Coronavirus (COVID-19) Survey (BICS) as part of our quality assurance and validation process.