NIESR estimated a 0.9% growth in UK GDP in Q4 of 2020, implying a total contraction of -9.8% for the whole year. With tight restrictions and some post-Brexit adjustment, Q1 is forecast to have negative growth on -3.4%. It added, “the short-term negative economic impact of lockdowns should be outweighed by the potential positive long-term health and economic impacts from controlling the virus and restoring confidence.”
“Today’s ONS data confirm a significant slowdown in the last quarter of 2020, despite November’s lockdown in England clearly having a far smaller effect than the first. Surveys and high frequency indicators suggest that recovery from the Covid-19 shock was weak even before a third lockdown become necessary in January. Temporary and permanent adjustments post-Brexit transition period are likely to also weigh on growth in the early part of 2021, but the vaccine roll-out provides some encouragement for consumption and investment in the second half of 2021 and beyond. The economic impact of the lockdowns is clearly negative in the short-term but will be significantly positive in the medium term if successful in controlling the virus and restoring confidence.” Rory Macqueen Principal Economist – Macroeconomic Modelling and Forecasting
