Sunday, January 23, 2022

The UK economy is finally rising above pre-pandemic levels, but warnings have been issued for 2022

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The UK economy is now bigger than it was before the pandemic. GDP rose by a much stronger-than-expected 0.9 percent in November, beating its size just before the country went into its first Covid-19 lockdown

According to the Office for National Statistics (ONS), gross domestic product (GDP) was 0.7 percent higher than in February 2020; Economists had only forecast growth of 0.4 percent for November.

Shaking off the specter of the Omicron Covid-19 variant, the UK economy grew 0.9 per cent in November, pushing gross domestic product (GDP) above pre-pandemic levels.

Many expected the Omicron variant to derail this advance in December, with the loss of momentum likely extending into January, and many firms are reporting severe staff shortages and consumers still wary of going out of business .

Still, some health officials believe the UK’s Omicron infection wave has now peaked, and analysts say the blow to the economy is likely to be short-lived, allowing the Bank of England to continue raising interest rates this year to increase.

The ONS said barring data revisions, quarterly GDP in the October-December period last year would match or exceed its pre-coronavirus levels as long as economic output does not fall by more than 0.2 percent in December.

The ONS said architects, retailers, couriers and accountants had a record month in November and the construction industry rebounded from several weak months as sourcing of raw materials became easier after problems in global supply chains.

However, the UK economy could still face challenges in the coming months even if coronavirus restrictions are eased.

Suren Thiru, chief economic officer at the UK Chamber of Commerce, said: “While the UK economy should recover following the lifting of Plan B measures, rising inflation and ongoing supply chain disruption could mean the UK’s economic growth prospects for remain much under pressure from 2022.”

Victor Trokoudes, CEO and co-founder of budgeting app Plum, also said: “To get us back to where we were, prices had to go up significantly.

“Economically, things are maybe better for us now than before, and that’s a good thing. But undoubtedly the challenge for the remainder of the year is spending pressures that will put most households under severe pressure and could jeopardize the recovery.”

Mr Trokoudes continued, “Our own research has shown that families have seen an average increase in the cost of daily necessities of 15 percent, well above what is tracking inflation.

“What’s critical now is that these families ensure their money goes further, whether through better budgeting and saving or through investing to stay ahead of inflation over the long term.”

James Smith, research director of the Resolution Foundation, also urged caution for the coming months.

“Today’s GDP data shows an economy growing robustly on the eve of omicron, with a welcome return to pre-pandemic monthly production levels as sectors like retail grew rapidly,” he said.

“But more recent data shows consumer-facing services like hospitality hit a brick wall in December and January as families become more cautious amid rising cases.

“Combined with rising inflation and rising energy bills, this means we may have to work back to that November production peak in early 2022.”

Finance Minister Rishi Sunak said: “It is amazing to see the size of the economy returning to pre-pandemic levels in November – a testament to the determination and determination of the British people.”

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