The UK will lead the economic recovery of developed nations out of the Covid-19 pandemic with its fastest growth in decades, but it is predicted to slip behind its peers by the end of 2023.
Economists surveyed by Bloomberg revised up their forecasts for 2021 UK growth to 6%, mainly due to the success of the country’s vaccine programme. This puts UK growth ahead of that of its peers in Germany, France, Italy and Spain.
However, they cut their prediction for 2023 growth to 1.7% (down 0.4%), suggesting the impact of the UK’s departure from the EU and country’s lagging productivity will take its toll.
New research from the Resolution Foundation has also suggested that the UK now faces a decade of critical policy decisions following the pandemic and as a result of Brexit.
It concludes that missteps could see its economy and living standards slip to the same level as Italy’s.
According to the report: “The economic turbulence that people, places and firms face as we recover from Covid-19, exit the EU, and see decarbonisation reach into citizens’ lives, goes beyond anything seen in a generation.”
Lack of vision
Together with ongoing technological and demographic shifts, these challenges pose questions about the UK’s possible routes to economic prosperity, according to the FT.
The Resolution Foundation claims the country lacks a shared view about what those routes should be.
Furthermore, the decade since the financial crisis has seen weak productivity double the gap in output per person between the UK and Germany from 6% to 12%, reports the Telegraph.
“If this relative decline continues at the same pace in the 2020s then the UK will end this decade closer to Italy than Germany when it comes to economic performance,” the foundation warned.
The Bank of England also recently raised its estimate for UK GDP growth to 7.25% in 2021, up from a previous forecast in February for growth of 5% this year, according to the Guardian.
However, Governor Andrew Bailey tempered his message by pointing out the two years of lost growth resulting from the pandemic.
“Let’s not get carried away. It takes us back by the end of this year to the level of output we had essentially at the end of 2019 pre-Covid. So that is good news in the context of where we’ve been, but it still means that two years of output growth have been lost to date,” he said.