Could 2021 be a fresh start for the UK economy?

Written by Andrea Frith

‘Uncertainty’ and ‘unprecedented’ are 2 words that have been used more in the last year than ever before. This has made forecasting even more difficult than usual, especially as no one can be certain how quickly a possible vaccine or the introduction of a 10-minute test will have.

 

 

The good news is that the IMF (International Monetary Fund) are forecasting a slightly less severe recession that was predicted in June. This change is both for the UK and the wider economy.

The outlook is still however one of a deep recession, just not quite as bad as originally predicted. The IMF now predict the economy to decline by 9.8% this year, the forecast in June was 10.2%. The difficulty comes when assessing how will the impact of the vaccine development make a difference. The hope of a cure for the virus that has caused colossal damage to the global economy this year, has seen economic boost and given more confidence that better times are ahead for 2021.

We have seen recent positive activity of shares in companies that were most affected during lockdown and social distancing e.g, airlines, hotels, travel and tourism. There will need to be evidence that these vaccines are in circulation very quickly and that they work before social distancing restrictions are reduced.

Economists are predicting that the outlook for 2021 is now more encouraging. Unfortunately, it is just too soon to know when the impact will take effect and hold as in some circumstances the damage is already done and irretrievable. Consumer habits are formed over a period of time and it may take longer to regain confidence and force old purchasing habits to return. Just like working from home will become the norm or at least part of the working week, online shopping, staying at home may become a permanent habit.

In summary, the latest GDP forecast for the last months of 2020 is further contraction following lockdown 2.0 and expected restrictions in the UK throughout the winter. This downturn is not expected to be as severe at the first quarter of 2020 given the recent lockdown is less restrictive and hopefully shorter. It is expected that in the Spring and Summer we will see recover probably in line with the decrease of the virus and its effects.

Planning will be difficult, and no business should just react at short notice to increase demand without budgeting and planning. There are many opportunities to out-source any increase in demand and this can include increasing headcount in the medium of long term. To discuss your potential manpower needs for 2021 and to explore really versatile and flexible options, please visit our website.

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