The expansion was ahead of forecasts despite a setback in December due to Omicron restrictions.
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The UK economy rebounded last year with growth of 7.5% despite falling back in December due to Omicron restrictions, official figures show.
It was the fastest pace of growth since 1941, although it came after a dramatic 9.4% collapse in 2020 as the pandemic forced parts of the economy to shut.
In December, the economy shrank 0.2% as Omicron restrictions hit the hospitality and retail sectors.
Chancellor Rishi Sunak said the economy had been “remarkably resilient”.
The figures from the Office for National Statistics (ONS) showed that in the last three months of 2021 growth was 1%, which ONS director of economic statistics Darren Morgan said was “pretty healthy” given Omicron’s spread.
The ONS numbers exceeded many economists’ predictions, with their average forecasts of 7.3% growth for the year and a 0.5% contraction in December.
Mr Morgan told the BBC the expansion in 2021 showed the UK was the fastest growing economy in the G7 group of nations, but urged caution about making strict comparisons.
“The growth in 2021 comes from a low base in 2020, when the economy fell sharply,” Mr Morgan said. “And if you look at where the UK economy is now, compared to its pre-pandemic level, which I know a lot of people do for a broader picture of the economy, the UK is middle of the pack, compared with the G7.”
He said using this comparison, the US, Canadian and French economies were above the UK’s, while the UK was above Italy, Germany and Japan.
The worst of the overall pandemic economic hit is now behind us but the aftershocks remain.
Downing Street is unlikely to avoid the opportunity to boast about 2021. During its hosting of the G7, the UK is now confirmed as the fastest growing economy of these major nations.
But that comparison needs a great dollop of context.
The 7.5% growth the UK economy recorded in 2021 is the highest of the G7 major economies and that does indicate a strong bounceback.
This, as the ONS points to, should be seen alongside the sharpest fall of 9.4% for the UK compared to those same economies in 2020. On the internationally comparable basis, the economy is still slightly smaller than it was at the end of December 2019, unlike the US, France and Canada. On the slightly more timely basis, using monthly data not available in other countries, the UK economy is larger than it was in February 2020.
The UK economy grew by 1% in the final quarter of 2021, a little lower than expectations, as the spread of the Omicron variant weighed on the economy in December.
But as ever during these extraordinary times, this already looks like a rear view mirror on events. Looking forward, the extraordinary cost of living squeeze, with energy and other prices leading to falls in average living standards, is the significant iceberg for the economy in 2022.
The ONS said that despite the fall in December, on a monthly basis GDP was in line with its pre-coronavirus level in February 2020.
However, GDP in the October-to-December quarter remains 0.4% below its pre-Covid levels of the final three months of 2019.
‘Rising prices’
Mr Sunak told the BBC: “Today’s figures show that despite Omicron the economy was remarkably resilient. We were the fastest growing economy in the G7 last year and are forecast to continue being the fastest growing economy this year.
“But I know that people are worried about rising prices, particularly energy bills, and although these are global challenges of course we’re going to act and that’s why last week we announced a significant package of support to help millions of families meet the cost of bills.”
The economy is expected to face headwinds in 2022.
Last week, the Bank of England raised interest rates, cut its economic growth forecast from 5% to 3.75% for this year and predicted that households were about to suffer the sharpest fall in living standards since records began three decades ago.
Thomas Pugh, an economist at RSM UK, said: “We expect all of the output lost during December and January to be regained in February and March, meaning that Omicron should not have had a lasting impact on the economy.
“However, the rebound may be relatively short-lived as inflation will continue to rocket in the coming months, peaking at around 7% in April.
“Inflation and tax rises mean households’ real incomes will fall by the largest amount in three decades in 2022, which will put a big dampener on their confidence and their ability to go out and spend.”