It might take the UK longer to recover from Covid-19 than most other nations, our British economic recovery tracker indicates.
UK GDP was already stagnating before the pandemic; in the last quarter of 2019 there was no economic growth. Since then, Britain’s economy has shrunk – by 2.9 per cent in January this year compared to the last month of 2020, figures released by the Office for National Statistics show. While GDP figures released today (13 April) show a small rebound in February, Britain’s GDP is still 8 per cent lower than pre-pandemic levels.
Figures from the Organisation for Economic Cooperation and Development (OECD) also show Britain experienced one of the biggest GDP slumps among G20 countries in 2020, with only Spain and Argentina performing worse.
Despite a successful vaccination campaign, the UK still has a long way to go before it returns to pre-pandemic economic activity.
Estimates from the OECD predict economic growth of 5.1 per cent for the UK this year, lower than the 6.2 per cent estimated for the G20 overall. And because the British economy, having been hit harder by the pandemic than other G20 countries, is recovering from a lower baseline, it is likely recovery will be slow. The UK is not expected to recover to pre-pandemic levels by the end of 2022.
Alternative projections from GlobalData, which cover 216 countries and territories, show a similar pattern, placing the UK in the bottom 30 countries for yearly GDP growth last year.
Our economic recovery tracker shows unemployment in the UK has risen, as have house prices, while retail sales have declined and businesses have become more pessimistic.
Trade, which was already suffering due to decreased demand under lockdown, has taken an additional hit with Brexit.
After suffering a 40.7 per cent decline in January 2021, exports to the European Union bounced back the following month as businesses began to adapt. But EU exports were still around 20 per cent lower than pre-pandemic levels in February, while non-EU exports have also fallen to 28 per cent below November 2019 levels.
Imports have also increased from both EU and non-EU partners in February. Much of that growth was spurred by imports from non-EU countries, which were around 25.6 per cent higher than the month before. EU imports have also grown, although slowly, and they remain far below usual pre-pandemic levels.
A gradual lifting of lockdown restrictions will boost consumer confidence and encourage spending. At the same time, the gradual exit from the pandemic will include the end of the furlough scheme and other measures, and unemployment and business failures that may have been masked by the stimulus programme will become stark.
The long-term effects of Brexit and the trade deals the UK has yet to sign are also unclear, although there are trends, including the exodus of foreign workers and diminishing business confidence, that point to a possible drag in recovery.
The Bank of England‘s Monetary Policy Committee agrees that, despite a GDP growth that was “less weak than expected” in January, “the outlook for the economy, and particularly the relative movement in demand and supply during the recovery from the pandemic, remains unusually uncertain”.
We’ll continue to update our economic recovery tracker as new data becomes available.