With nearly 20 million individuals having received a first dose of the COVID-19 vaccine so far in the United Kingdom, at a pace of around 300,000 doses administered per day, it is fair to say that 2021 should be a year of recovery for the British economy if the virus situation subsides as expected.
The easing of lockdowns, the potential return of people to their offices, and the resumption of school activities should help in getting the economy back on track and top financial executives within the country seem to think that this will be the case.
This is reflected by the Deloitte CFO Survey, which shows that more than 60% of these professionals are optimistic about the short-term outlook of their companies, this being the highest level reached by the indicator in roughly 12 years.
If the British economy were to bounce strongly in the following quarters, certain opportunities would present themselves within the domestic stock market and, through online investments, individuals and businesses could capitalize on this uptrend.
What do economists expect to see in 2021?
A recent report from global accounting firm PwC estimates that the gross domestic product of the Kingdom should grow by around 2.2% and 4.8% depending on the pace of the recovery.
For the purpose of forecasting the performance of the economy during this period, the firm has drafted two possible scenarios for the recovery.
The first scenario is one in which the British economy recovers from the impact of lockdowns by the end of 2021 – known as the ‘quick scenario’ – while the other scenario proposes a situation in which it takes longer for the economy to bounce, possibly recouping from the effect of lockdowns by the end of the first semester of 2023.
As for a full-blown recovery, PwC doesn’t expect the British economy to fully recoup its lost output by the first quarter of 2023 or, under the slow scenario, by the end of the first semester of 2024.
These somehow gloomy forecasts are possibly driven by the persisting uncertainties resulting from a “rushed” Brexit deal while PwC also expects a decline in population growth over the coming years as prospective parents could decide to delay their plans based on how the economy recovers.
How is the most popular British stock index reacting to these forecasts?
The FTSE 100 index, possibly the most popular and representative stock index for the United Kingdom, has not yet climbed back to its pre-pandemic level, despite the efforts of the British government to contain the economic and financial fallout caused by the pandemic through accommodative fiscal and monetary policies.
Last year, the index dropped as much as 34% during the February-March market crash, although it trimmed some of those losses by the end of the year following the approval of multiple vaccines in the United States.
Meanwhile, the FTSE 100 – also known as the footsie – has produced a 2% gain for investors since the year started while other indexes in the region such as the German DAX 30 and the French CAC 40 index have yielded 2% and 4.4% respectively.
Will the next three to four years be good for British businesses?
Based on PwC’s forecasts, the pace of the recovery in the United Kingdom will probably be a bit slower than most expect, as there are other factors aside from the COVID situation that could weigh on the nation’s performance on short notice – i.e. Brexit.
Meanwhile, the seemingly shy advance of the FTSE 100 stock index compared to the situation of other stock indexes in and outside Europe highlights that investors continue to be worried about the future of the British economy despite the presence of certain positive catalysts such as en-masse vaccinations.
All things considered, for small businesses, things should pick up progressively as people get back to their normal lives – possibly during the third quarter of 2021 and forward.
Most of this upturn would come amid a resumption in capital expenditures from large companies within the nation and the rehiring of laid-off or furloughed workers in the aftermath of the pandemic.
Time will only confirm which of the scenarios outlined by PwC will play out. In any case, things will probably feel more normal by 2022 rather than 2021.
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Source: http://hrnews.co.uk/what-to-expect-from-the-british-economy-in-2021/
