The Organisation for Economic Co-operation and Development (OECD) has reported positive predicted figures for the UK market as we approach that all-important Step 4 in the roadmap out of lockdown. A cautiously optimistic sigh of relief can be breathed, as the thinktank has forecasted a 7.2% growth in the UK economy during 2021. This would actually be the fastest level of growth since 1941 and the figure outperforms many other advanced nations, including the US.
Hopeful steps in the right direction
This is following a dismal, but unsurprising, shrinking of the economy by 9.8% in 2020. The predicted growth will surely be welcome news to the government, who are currently keeping a close eye on Covid-19 cases as we draw close to the last phase in the roadmap this summer.
The OECD also reported that it believes the UK service sector to be a key contributing factor for the increase, with retailers, pubs and other hospitality venues set to rebound as restrictions ease off. We are now seeing those encouraging signs from an awakening of these industries after what feels like a long and difficult hibernation.
The UK economy grew in February 2021 and in the week after the reopening of non-essential shops, footfall rose sharply in the UK by 31% on the previous week. The partial reopening of the economy also saw the fastest private sector growth in almost eight years. And it is thought those who were able to add to their savings pot during the last year will contribute towards the recovery as they spend some of their reserves this summer. However, this may not be the case for lower-income families who could struggle as the pandemic support nets ease off along with restrictions.
Not out of the woods yet
Despite the optimistic growth figures released by the OECD, it did warn of the UK experiencing potential longer-term economic scarring compared to other G7 nations, in part due to Brexit, when looking at recent projections to 2025 and comparing these with pre-pandemic forecasts. While other major EU countries may expect a 0.3% decline in predicted growth figures, the UK could see a 0.5% reduction in comparison.
Unemployment is also set to rise by the end of the year to 6.1% as the furlough scheme comes to an end.
Globally, though, the worldwide economy is set to grow this year according to the OECD. Yet with countries still rolling out their vaccination programmes and the emergence of new variants throwing the proverbial spanner in the works, it is likely to be a marathon, rather than a sprint, back to normally-operating markets.