A rapid rollout of the Covid-19 vaccine across the UK’s four nations lifted GDP by 2.1% in March, helping prevent a steep fall during the first three months of the year, according to official figures.

The economy retreated by a better than expected 1.5% during the first quarter of 2021 as the successful vaccine programme allowed the government to begin easing restrictions while businesses adapted to the constraints at a quicker pace than expected.

City economists had expected a 1.7% contraction – earlier in the year there were fears that the second wave of the virus in 2020 and a third lockdown would hit the economy harder and plunge the UK into a full-blown recession.

School closures and a large fall in retail sales were blamed by the Office for National Statistics for much of the economy’s contraction. Growth returned to all the main sectors of the economy in March as Covid restrictions eased, at a speed not seen since August 2020.

The services sector, which accounts for about three-quarters of activity, fell by 2%, mostly because of the closure of the hotel and leisure sector.

Manufacturing, which has been hit by falling demand because of Brexit and the lockdown, maintained much of the momentum it gained in the second half of last year, after it shrank by only 0.7% in the first quarter.

The construction sector, which accounts for about 6% of economic activity, expanded by 5.8% over the quarter.

Last week the Bank of England upgraded its forecasts for GDP growth during 2021 to 7.25%, which would propel the economy to its fastest annual expansion since the second world war.

The central bank’s bullish outlook, mostly based on the faster than expected vaccine rollout, also predicted that unemployment would peak at below 5.5% in the third quarter of this year and business investment would rebound strongly.

Several countries have published first estimates of GDP for the first quarter of the year, including the US, Germany, France, Italy and Spain. Real GDP is estimated to have increased by 1.6% in the US and 0.4% in France, while there were contractions in Germany, Spain and Italy, the ONS said.

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Dean Turner, an economist at UBS Global Wealth Management, said: “There is reason for optimism as today’s figures confirm that the UK economy has weathered the first-quarter restrictions much better than initially feared.

“Moreover, the bounce in activity seen in March, which was the strongest monthly GDP print since August 2020, provides an encouraging backdrop for the second quarter.”

The chancellor, Rishi Sunak, said: “Despite a difficult start to this year, economic growth in March is a promising sign of things to come. As we cautiously reopen the economy, I will continue to take all the steps necessary to support our recovery.”

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