Britain could enter a double-dip recession after third national lockdown.
A “conspicuously depressed” end of 2020 puts the country on track for economic decline in the first quarter, according to a report.
It comes when global GDP suffered sharpest drop since the end of World War II in 2020.
Millions were unemployed or on leave, and governments were pumping Trillions of dollars in their economies to prevent greater harm.
A survey by the UK Chambers of Commerce (BCC) found that nearly half of all businesses (43%) saw a drop in sales in the last three months of 2020, which rose to more than three-quarters (79%) in hammered hospitality and catering.
This compares to 66% of hotel and catering companies in the third quarter.
The quarterly economic survey found that businesses facing consumers have had to pay tribute since the November lockdown, with recent restrictions adding to their misery.
Around 26% of the 6,203 companies questioned for the survey reported increasing sales, while 30% said that nothing had changed.
Suren Thiru, head of the BCC’s economics department, said: “These results suggest that economic activity declined sharply in the final quarter of 2020 as the reintroduction of tighter coronavirus restrictions weighed heavily on key growth drivers.
“The services sector had a particularly difficult quarter, with customer-facing companies facing the renewed restrictions the most.
“While the vaccine rollout offers real optimism, a new national lockdown means a significant recession is becoming increasingly likely in the first quarter of this year,” she added.
Manufacturers’ orders improved at the end of last year. The balance sheet of companies that recorded an increase in domestic sales rose from minus 15% in the third quarter to minus 9%.
The balance of companies reporting an increase in export sales rose from minus 26% in the last three months to minus 8%.
However, the BCC said this was largely due to a temporary surge in inventory levels on Brexit before the year-end contract expired.
Cash flow – a key indicator of corporate health – in the services sector was also found to remain at levels not seen since the financial crisis, despite a slight improvement in the fourth quarter.
According to BCC, 43% of companies saw an overall deterioration in cash flow, with only 21% reporting an improvement.
The survey took place during the second lockdown in England and 94% of respondents were small businesses.