One year on from lockdown: is the UK ready to rebound from its biggest output fall in 300 years?

Tue 23 Mar 2021
Posted by: William Barns-Graham
Trade News

covid vs uk

A year ago, on 23 March 2020, with Covid-19 case numbers rising rapidly, the first lockdown was announced by Prime Minister Boris Johnson.

In a year like no other, how has the UK economy and global trade been affected?

1. Impact

A report from the Centre for Economics and Business Research (CEBR), reported in the Guardian, shows that lockdown has cost the UK £251bn – a figure almost twice the GDP of Scotland.

A report from the Office for National Statistics also shows that UK GDP was 9% below where it was in February 2020, the last full month before the first lockdown.

2. An uneven effect

Some parts of the country and some sectors have suffered more than others.

Although London and the south were hit hardest in absolute terms, Covid-induced losses were less than their typical contributions to the economy.

London accounted for just under a quarter of the UK’s gross value added (GVA) but suffered just over a fifth (20.5%) of the losses since the start of the pandemic.

Other areas, such as Scotland, Wales, the Midlands, and the East of England, have suffered proportionally greater Covid-induced losses and could be subject to lingering effects of joblessness and business closures.

CEBR economist Sam Miley, said: “Consumer footfall has plummeted, businesses are still shut, and many individuals have found themselves out of work. Further bouts of area-specific restrictions have added some regional variation to economic fortunes, a matter made all the more pertinent given the government’s promises to ‘level up’.”

3. UK particularly badly hit

The UK had suffered a bigger dip in GDP than peer countries, said the Office for Budget Responsibility (OBR).

The UK’s independent fiscal watchdog, adds: “the primary reason that the UK has suffered a greater economic hit from the pandemic is simply that the UK has experienced higher rates of infection, hospitalisations and deaths from the virus than other countries.”

According to the FT, the last year has been the “worst fall in output in 300 years” and says it is “only rivalled by severely harsh winters when the UK was an agrarian society”.

4. However, there’s hope ahead

The UK’s rapid vaccine rollout is paving an earlier route out of lockdown than many European neighbours, who are currently facing a third wave of inspections.

A strong economic recovery in the third quarter will see the economy 12% bigger than it is today, the OBR forecast on 3 March.

Despite the strong rebound, the OBR forecast GDP to remain 3% below its pre-pandemic trend in 2024, which means the virus would deal the UK economy lasting damage.