According to Andy Haldane, the Bank of England’s chief economist, the UK economy is likely to bounce back like a ‘coiled spring’ once the shackles of lockdown have been taken off, predicting annual growth could be in double digits next year. Many UK households have significantly improved their personal finances during the pandemic lockdown, with ‘accidental savings’ of over GBP250bn by July. ‘So come the Spring, we can expect the UK economy to be firing on all three cylinders – households, companies and government. While today the economy is shrinking and inflation is well below target, a year from now annual growth could be in double-digits and inflation back on target’ adding ‘The economy is poised like a coiled spring. As its energies are released, the recovery should be one to remember after a year to forget’.
Haldane’s prediction of the next few quarters of growth comes as the UK reported that in 2020 GDP contracted by 9.9%, more than twice that seen in 2009, marking the largest annual fall in UK GDP in more than 300 years. GDP in the 4th Quarter is estimated to have grown by 1.0%, following revised 16.1% growth in Quarter 3. Despite two consecutive quarters of growth, the level of GDP in the UK is 7.8% below its Quarter 4 2019 level.
The UK's hit from the virus has been far larger than many other developed countries. Whilst part of the UK’s slump can be accounted for by differences in measuring GDP, the economy was also hurt by its reliance on so-called social consumption and longer lockdowns. As we have mentioned before, this recovery will also bring into focus the divergent experiences of individuals and families dealing with the coronavirus. Whilst many white-collar workers are able to work from home, to continue seamlessly with their jobs as well as save money, there are vast swathes of the economy still under immense pressure.