UK economy to suffer £700bn output loss due to Covid and Brexit, thinktank warns | Economics

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Britain’s economy is on track to suffer more than £700bn of lost output caused by Covid-19, made worse by the government’s mishandling of the health emergency and Brexit, one of the UK’s leading economics thinktanks has warned.

The National Institute of Economic and Social Research (NIESR) said the UK was facing worse permanent damage than other rich nations due to a “poor Covid-19 response” from Boris Johnson’s government.

Despite an improving growth outlook thanks to rapid progress with the Covid-19 vaccination programme, it said the scale of the UK’s economic collapse last year – the worst annual performance for 300 years – meant Britain was further behind other major economies such as the US and Germany.

The UK’s oldest independent economic research institute said the level of GDP was on track to be almost 4% lower in 2025 than it would have been without the pandemic. Equivalent to £1,350 per person a year, it said the cumulative loss of economic output would be worth £727bn over the five-year period.

“While all countries have seen downgrades in their economic outlooks, those which have handled Covid-19 well are likely to find their long-term growth prospects downgraded by less,” it said.

In a critical report for the government, NIESR said a decade of austerity-driven cuts overseen by the Conservatives had left the UK’s health and social care capacity in a “weak state” as the pandemic struck.

Highlighting research showing the UK had among the lowest numbers of hospital beds and doctors per person among advanced nations, it said: “Too little spending previously is likely to have contributed to 2020’s high Covid-19 mortality rates.”

The UK economy shrank by 9.8% last year, the worst performance in the G7, as the government delayed the launch of lockdown and took longer to relax measures, as well as due to higher rates of social spending in the UK than other nations.

However, NIESR said improvements in public health prospects from rapid progress administering the coronavirus vaccine and the lifting of lockdown measures would support a recovery in consumer confidence and a strong rebound in economic activity this summer.

The thinktank said it expected the economy to grow by 5.7% this year and to recover its pre-pandemic level at the end of 2022, in a sharp upgrade from its previous estimates for growth of 3.4%. It is however significantly below forecasts from the Bank of England for a recovery to pre-crisis levels by the end of this year, with growth of 7.25% in 2021 – the fastest expansion since the second world war.

It said the UK’s open economy would suffer from a lingering impact on world trade caused by the pandemic, while “remaining negative consequences of Brexit” would also have an impact.

Dr Hande Küçük, deputy director at NIESR, said: “Beyond short-term optimism, the outlook for the UK economy is less certain given the economic and social challenges that existed before the pandemic. Our analysis at sectoral, regional, and household level shows that despite the rhetoric about ‘building back better’ existing inequalities could be exacerbated by the pandemic and an uneven recovery.”

Hafta Ichi
Source: The Guardian
Keyword: UK economy to suffer £700bn output loss due to Covid and Brexit, thinktank warns | Economics

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