The UK economy begins 2021 on the back foot as record numbers of coronavirus infections and tougher restrictions cloud the outlook for growth and limit the chances of a rapid recovery from the country’s worst recession in 300 years. There had been hopes that the arrival of successful Covid vaccines could prompt a rebound in activity. But with new government controls to combat the rising infection rate, the outlook is deteriorating. Here are five charts for the UK’s economic prospects in 2021.
GDP
Rising coronavirus infections and lockdown controls are expected to weigh on the economy in the opening months of the year before enough people can receive the vaccine and restrictions can be relaxed. Gross domestic product (GDP) was expected to grow by 5.5%, according to Office for Budget Responsibility forecasts in November. While this would mark the strongest growth rate since the late 1980s, the depth of the Covid recession means the economy would not return to its pre-pandemic peak until late 2022.
Since the launch of tougher Covid restrictions, the Resolution Foundation thinktank now expects GDP could be as much as 6% smaller by Easter than forecast, cutting the 2021 growth rate to 4.3%. Other countries around the world are also grappling with a renewed surge in the virus, but forecasts by the Organisation for Economic Co-operation and Development published in early December ranked the UK behind every major economy apart from Argentina. Despite a last-minute Brexit trade deal, disruption is still expected as companies adapt to new EU arrangements. Economists view Boris Johnson’s deal as a “hard Brexit”, because it involves more barriers to trade than EU membership and other possible alternatives. As a result, the OBR estimates a long-term loss of output of about 4% compared with remaining in the EU.
