UK’s Worst Economic Performance in Years
Last year, the UK economy shrank by 10%, its worst performance in three centuries, and one of the lowest growth rates in Europe and the world. The UK government has so far been forced to quarantine the nation in three stages and restrict trade and economic activities. Production and trade figures have become more promising, with UK’s trade volume with the EU and the US rising sharply compared to March, giving businesses hope for a stronger economic growth.
Coronavirus Outbreak Disrupted Business in the UK
In March, government revenues fell by £28 billion compared to the previous month. The only good news for the economy this month was that the retail sector experienced a positive growth of 5.4%. After the end of the second wave of the coronavirus outbreak in the UK, many businesses have reopened, but their capacity has not yet returned to pre-pandemic levels. The UK, the main source of Covid-19 in Europe, has more than 4 million cases and 127,000 deaths, and about two-thirds of the population has been vaccinated so far. It has the highest vaccination rate in Europe.
Pre-Brexit Economic Statistics Predicted Negative Economic Growth
A report by the Office for National Statistics published before Brexit showed that economic growth was at its lowest level in nearly seven years on the eve of leaving the European Union. According to the report, UK’s gross domestic product grew by 0.1% in September and October, which was weaker than forecast. Meanwhile, statistics show that in November 2020, the UK gross domestic product fell by 0.3%, which is at its lowest level compared to 2012. Rob Kent-Smith, head of GDP at the ONS said economic growth in November 2020 in the services sector was negative by 0.3%, up from 0.3% the previous month. According to Kent-Smith, other sectors, including industry, science and technology, and large businesses, have also experienced negative economic growth.
Declining Investment Figures in the UK
While retail sales have fallen sharply, corporations have also stopped investing in recent months amid political uncertainty over the parliamentary election and UK’s exit from the EU, the Bank of England has forecast. Andrew Sentance, a former member of the Monetary Policy Committee of the Bank of England, wrote in a note to the Guardian that the dark shadow of Brexit continues to be cast over the country’s economic future.
Hinesh Patel, portfolio manager at Quilter Investors, said a health crisis has swept the UK and the world, triggering a full-blown economic crisis. The fact is that no country was prepared to face such a thing, and it should be noted that things may get very bad again. Everyone should focus and try not to repeat the bad economic performance of the previous year, but it is clear that the restrictions will continue for the time being, and this will affect businesses and households.
The UK Suffered the Worst Economic Downturn in Europe
Due to the damages caused by the quarantine, the UK economy suffered more than any other European country in the second quarter of 2020 and the country entered a recession. According to preliminary figures, the UK gross domestic product (GDP) fell by 20.4% in the second quarter of 2020, the worst drop since the statistics began in 1995. The report shows that the economic damages have been enormous. In the second quarter, the construction sector fell by 35%, the services sector, the UK’s largest sector, fell by 20% and industrial output fell by 17%. Economic recovery began in June with the return of construction, and the service sector grew by 7.7%. The report also found that government spending fell by 14% in the second quarter, while corporate investment fell by 31.4%. Consumer spending fell 23.1%, but the hospitality industry fell by 75%. Wages and incomes also fell by 1.6%, the biggest drop since 2008 and the first since 2015.
When Will UK’s Economic Growth Return to Normal?
Economists polled by Reuters estimate that the UK economy will return to pre-COVID-19 levels by mid-2022, with the highest unemployment rates reaching 6.2% this year. The UK, meanwhile, has the highest death rate from the coronavirus in Europe. Last year, the UK economy plunged to its worst levels in more than three decades. A Reuters’ survey of around 70 economists from 7-12 April shows that a majority believe the UK economy will grow by 5.0% this year and by 5.5% in 2022.
A previous poll in March, following new quarantines, estimated UK’s economic growth for this year and next year at 4.6% and 5.7%, respectively. The poll estimated that the UK economy will plunge by 2.3% in the fourth quarter. But in a new survey, with some quarantine restrictions lifted, economic growth in the third and fourth quarters is estimated at 3.5% and 3%, respectively.
UK suffered the most economic blow due to the pandemic. The outbreak has doubled UK’s problems during the exit from the EU, and experts believe that Boris Johnson’s insistence on UK leaving the EU without any clear plan for an economic future has led to negative economic growth.