The UK economy shrank 2.9 per cent in January with services being the main drag on growth.

The latest figures from the Office for National Statistics shed light on how the third lockdown reduced economic activity.

Falls in consumer-facing services industries and education drove a contraction of 3.5 per cent in the services sector in January.

By contrast, the construction sector grew by 0.9 per cent driven by growth in new work.

January’s GDP was 9.0 per cent below the levels seen in February 2020, compared with 4.0 per cent below October 2020 that was the initial recovery peak.

Economists say the fall was less than originally feared compared to the first lockdown when the contraction was harder.

The ONS also published figures on how the UK’s new trading relationship with the EU is shaping trade flows.

These show imports from the EU are down 28 per cent and exports to the EU are down 40 per cent.

Reacting to the figures Quilter Investors portfolio manager Paul Craig says: “January’s economic growth picked up where 2020 left off. It is not surprising to see the economy go back into reverse during the first month of the year given we saw national lockdown 3.0 introduced.

“The bigger question is going to be what impact this lockdown will have on long-run growth, particularly given the real unlocking of the economy doesn’t come until April. This is likely to be a very sobering first quarter of economic growth, but for now it is a case of keep calm and carry on.

“The government and Bank of England will be thinking they just need to get through this first part of the year before the sun is shining once again. The incredibly successful vaccine rollout has given hope to an economic rebound in the second half of the year, but it remains to be seen exactly how much of the huge mass of accumulated savings will actually be deployed by consumers.”

He adds: “Rishi Sunak’s Budget last week set the tone of spend now and recoup later. However, he will need to watch these growth figures closely over the next few months as the last thing he will want to do is prematurely choke off the recovery at the exact point things begin to feel normal once more.

“That said, the BoE remains on hand to support the government in keeping the economy afloat, and it still has more room within its response to help. What is clear, however, is that we are in this recovery for the long haul, we just don’t quite yet know exactly how long that is going to be.”