Britain's coronavirus-ravaged economy shrank 9.9 per cent in 2020, the biggest annual fall in output since modern records began.
But the country avoided heading back towards recession in the final quarter of the year, official figures showed on Friday.
UK gross domestic product grew 1.2 per cent in December alone, compared with a 2.3 per cent fall in November , the Office for National Statistics said, leaving output 6.3 per cent lower than in February before the start of the pandemic.
This makes it unlikely that Britain will record two straight quarters of contraction – the standard definition of recession in Europe – even though the economy is expected to shrink sharply in early 2021 because of the effects of a third Covid-19 lockdown.
Chancellor of the Exchequer Rishi Sunak said the economy had suffered a serious shock from the pandemic after its worst slump in more than 300 years.
"Today's figures show that the economy experienced a serious shock as a result of the pandemic, which [is being] felt by countries around the world," he said.
"While there are some positive signs of the economy’s resilience over the winter, we know that the current lockdown continues to have a significant impact on many people and businesses.
"That's why my focus remains fixed on doing everything we can to protect jobs, businesses and livelihoods."
Jonathan Athow of the ONS said there were signs of recovery in certain sectors late last year.
"Loosening of restrictions in many parts of the UK saw elements of the economy recover some lost ground in December, with hospitality, car sales and hairdressers all seeing growth," he said.
"An increase in Covid-19 testing and tracing also boosted output. The economy continued to grow in the fourth quarter as a whole, despite the additional restrictions in November.
"However, GDP for the year fell by nearly 10 per cent, more than twice as much as the previous largest annual fall on record."
The Bank of England believes that it will take until early 2022 before the economy regains its pre-Covid size, assuming vaccination continues to run smoothly.
UK harder hit than most
Last year's fall in output was the biggest since modern official records began after the Second World War. Longer-running historical data suggest it was the biggest drop since 1709 when Britain suffered its so-called 'Great Frost'.
The fall is steeper than almost any other big economy, though Spain – also hard-hit by the virus – suffered an 11 per cent decline.
The UK has reported Europe's highest death toll from Covid-19 to date but some of the damage reflects how the British economy relies more heavily on face-to-face consumer services than other countries.
However, Britain has vaccinated many more people than other European countries so far, raising the prospect of a bounce-back for its economy later this year.
BoE chief economist Andy Haldane said on Thursday that the UK economy was “poised like a coiled spring” and economic growth could hit double digits over the coming year because households are sitting on savings after spending so much time stuck at home.
Mr Haldane said that this collective “nest-egg” could amount to more than £250 billion ($344.60bn) by July if recent trends continue.
"While today the economy is shrinking and inflation is well below target, a year from now annual growth could be in double digits and inflation back on target," he wrote in the Daily Mail.
“The economy is poised like a coiled spring. As its energies are released, the recovery should be one to remember after a year to forget.”
Economists said that Friday's figures showed that Britain's economy was proving more resilient to lockdown than earlier in 2020.
"Damage from restrictions has diminished since the initial lockdown in the spring and is more heavily concentrated in a few hard-hit, largely consumer-facing industries, hospitality being the main one," ING economist James Smith said.
Some sectors such as manufacturing showed output just 2.5 per cent below year-ago levels in December, while the much larger services sector was 7.2 per cent below.
Within the services sector, high street retailers, pubs and restaurants have been hit especially hard. But unemployment has risen at a much slower rate than expected, largely because of government subsidies such as the furlough scheme to keep people in work.