PanamaTimes

Friday, Mar 29, 2024

UK economy rebounds with fastest growth since WW2

UK economy rebounds with fastest growth since WW2

The UK economy rebounded last year with growth of 7.5% despite falling back in December due to Omicron restrictions, official figures show.

It was the fastest pace of growth since 1941, although it came after a dramatic 9.4% collapse in 2020 as the pandemic forced parts of the economy to shut.

In December, the economy shrank 0.2% as Omicron restrictions hit the hospitality and retail sectors.

Chancellor Rishi Sunak said the economy had been "remarkably resilient".

The Office for National Statistics (ONS) figures showed that in the last three months of 2021 growth was 1%, which ONS director of economic statistics Darren Morgan said was "pretty healthy" given Omicron's spread and the introduction of some restrictions.


The figures were stronger than expected, and Mr Morgan told the BBC the expansion in 2021 showed the UK was the fastest growing economy in the G7 group of nations. However, he urged caution about making strict comparisons.

"The growth in 2021 comes from a low base in 2020, when the economy fell sharply," Mr Morgan said. "And if you look at where the UK economy is now, compared to its pre-pandemic level... the UK is middle of the pack, compared with the G7."

He said using this comparison, the US, Canadian and French economies were above the UK's, while the UK was above Italy, Germany and Japan.


The worst of the overall pandemic economic hit is now behind us but the aftershocks remain.

Downing Street is unlikely to avoid the opportunity to boast about 2021. During its hosting of the G7, the UK is now confirmed as the fastest growing economy of these major nations.

But that comparison needs a great dollop of context.

The 7.5% growth the UK economy recorded in 2021 is the highest of the G7 major economies and that does indicate a strong bounceback.

This, as the ONS points to, should be seen alongside the sharpest fall of 9.4% for the UK compared to those same economies in 2020. On the internationally comparable basis, the economy is still slightly smaller than it was at the end of December 2019, unlike the US, France and Canada. On the slightly more timely basis, using monthly data not available in other countries, the UK economy is larger than it was in February 2020.

The UK economy grew by 1% in the final quarter of 2021, a little lower than expectations, as the spread of the Omicron variant weighed on the economy in December.

But as ever during these extraordinary times, this already looks like a rear view mirror on events. Looking forward, the extraordinary cost of living squeeze, with energy and other prices leading to falls in average living standards, is the significant iceberg for the economy in 2022.

The ONS said that despite the fall in December, on a monthly basis GDP was in line with its pre-coronavirus level in February 2020.

However, GDP in the October-to-December quarter remains 0.4% below its pre-Covid levels in the final three months of 2019.

Mr Sunak told the BBC: "Today's figures show that despite Omicron the economy was remarkably resilient. We were the fastest growing economy in the G7 last year and are forecast to continue being the fastest growing economy this year.

"But I know that people are worried about rising prices, particularly energy bills... and that's why last week we announced a significant package of support to help millions of families meet the cost of bills."

Last year's growth was the strongest since ONS records began in 1948 and the fastest since 1941, during World War Two, using data collected by the Bank of England.

The slump of 9.4% in 2020 was the biggest drop since 1919 when there was demobilisation after World War One.

'We lost the fizz off the top of a glass of champagne'

After 18 months of uncertainty, Ollie Vaulkhard's coffee shop and restaurant chain in north east England was seeing a strong end to 2021.

He told the BBC's Wake up to Money programme that October and November were great months for the Vaulkhard Group as the economy opened up, but then things started to slow when Omicron hit.

"We lost customers, we lost staff to isolation and we had people being cautious because they had plans for Christmas."

He doesn't regard December as a disaster, more a loss of momentum. "We lost the fizz off the top of a glass of champagne," he said.

A better December would have been a good launch into 2022, when Mr Vaulkhard expects some tough times.

"We have wage cost rises, we have supply cost rises, we've had some brewery costs going up by 7% - they are all large," he said.

The pandemic and lockdown kept a lid on costs for two years, but suddenly it's changing.

"I would prefer not to have them [price rises], but given the challenges we had this seems like another bridge to cross that we'll have to find a way over."

The economy is expected to face headwinds in 2022. Last week, the Bank of England raised interest rates, cut its economic growth forecast from 5% to 3.75% for this year and predicted that households were about to suffer the sharpest fall in living standards since records began three decades ago.

This, said Labour's shadow chief secretary to the Treasury, Pat McFadden, would mean the economy will "crawl" this year and see the slowest growth of any G7 country.

"The reality is the way the government runs our economy is trapping us in a high tax, low growth cycle," he said.

Inflation is forecast to hit 7% in April, the same month workers and firms will start to see a rise in their National Insurance (NI) contributions. Mr Sunak has been under pressure to scrap the NI increase, but vowed this month that it would go ahead.

Thomas Pugh, an economist at RSM UK, said he expected output lost during December and January to be regained in February and March, "meaning that Omicron should not have had a lasting impact on the economy".

But he warned that consumer spending power would take a big hit in 2002.

Suren Thiru, head of economics at the British Chamber of Commerce, said that "crippling" inflation, tax rises in April, and higher energy bills means "the UK economy is facing a materially weaker 2022".

Newsletter

Related Articles

PanamaTimes
0:00
0:00
Close
Apple warns against drying iPhones with rice
In a recent High Court hearing, the U.S. argued that Julian Assange endangered lives by releasing classified information.
Global Law Enforcement Dismantles Lockbit Ransomware Operation
Russian opposition leader Alexey Navalny has died at the Arctic prison colony
The President of Argentina Javier Mile does not fly private, he flies commercial, with the citizens he represents. And they LOVE him for it.
Bitcoin Reaches $50,000 for First Time in Over Two Years
Belo Horizonte: Brazil's Rising Carnival Hotspot for 2024
In El Salvador, the 'Trump of Latin America' stuns the world with a speech slamming woke policing after winning a landslide election
Tucker’s interview with Putin is over 50M views on X within the first 5 hours.
Finnish Airline, Finnair, is voluntarily weighing passengers to better estimate flight cargo weight
President Nayib Bukele has proudly announced El Salvador's remarkable achievement of becoming the safest nation in the Western Hemisphere.
Former Chilean President Sebastian Piñera Dies in Helicopter Crash
This farmer seems to understand science a bit more than the event organizer, Klaus Schwab.
Facebook turns 20: From Mark Zuckerberg's dormitory to a $1trn company
The Coolest Dictator in the World" on the Path to Victory in El Salvador
Macron, France and fake news
Indian-Origin Man 'King' Arrested For Smuggling $16 Million Drugs Into US
Can someone teach Americans that not every person with slanted eyes is Chinese?
Europe's Farmers Feeding the People, Protesting Against Politicians Who Do Nothing for Their Country and Serve Only Themselves at Taxpayers' Expense
Paris Restaurant That Inspired 'Ratatouille' Loses $1.6 Million Worth Of Wine
Brazilian Police Investigate Bolsonaro's Son for Alleged Illegal Spying
Police in Brazil Raid Residence of Bolsonaro Associate Over Allegations of Illegal Spying
Border Dispute Escalates as Texas Governor Vows Increased Razor Wire
OpenAI Enhances ChatGPT-4 Model, Potentially Addressing AI "Laziness" Issue
The NSA finally acknowledges spying on Americans by acquiring sensitive data
Report Reveals Toxic Telegram Group Generating X-Rated AI-Generated Fake Images of Taylor Swift
US Border Patrol States 'No Plans' to Remove Razor Wire Installed in Texas
Bitcoin Experiences Approximately 20% Decline in Value
Klaus Schwab recently appointed himself as the Earth's "trustee of the future."
DeSantis Drops Out, Endorses Trump.
Nikki Haley said former President Trump is "just not at the same level" of mental fitness as he was while president in 2016.
Residents of a southern Mexican town set the government palace on fire in response to the police killing of a young man
Samsung Launches AI-Driven Galaxy S24, Ushering in New Smartphone Era
Judge Questions SEC's Regulatory Overreach in Coinbase Lawsuit
The Ecuador prosecutor who was investigating the television studio attack, has been assassinated.
Is artificial intelligence the solution to cyber security threats?
Vivek Ramaswamy suspends his US election campaign and endorses Trump.
Viral Satire: A Staged Satirical Clip Mistaken as Real Footage from the 2024 World Economic Forum in Davos
The AI Revolution in the Workforce: CEOs at Davos Predict Major Job Cuts in 2024
Ecuador Reports 178 Hostages in Prison Gang Standoff
The Startling Cuban Espionage Case That Has Rattled the US Government
Two Armed Men in Ecuador, Dressed as Batman and The Joker Storm the Streets.
Armed Gang Raids Ecuadorian TV Station Following State of Emergency Declaration
Anti-Democratic Canada: Journalist Arrested for Questioning Canadian Finance Minister on Support of Terrorist Group
Ecuador's 'Most-Wanted' Criminal Vanishes from Prison
Mexican Cartel Supplied Wi-Fi to Locals Under Threat of Fatal Consequences for Non-Compliance
Border Surge Leads to Over 11,000 Migrants Waiting in Northern Mexico
Outsider Candidates Triumph in Latin American Elections
As Argentina Goes to the Polls, Will the Proposal to Replace the Peso with the Dollar Secure Votes?
Fatal Shark Attack Claims Life of Boston Woman Paddleboarding Near Bahamas Resort, According to Police
×