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We are currently coming to terms with the greatest public health crisis in modern times resulting in a huge human and economic toll globally. The UK’s economy shrunk by 15% in just one year, seeing the largest reduction in economic output in hundreds of years. Yet, despite this, the UK and its economy have shown their resilience.
A highly successful vaccine rollout has seen over 80% of the adult population receiving at least their first dosage, meaning the country is on track to reach vaccine-based herd immunity by the third quarter of 2021. This intensive vaccination drive has allowed the easing of lockdown restrictions, which now means the country is enjoying a strong economic bounceback. Whilst the vaccine rollout and the easing of lockdown measures have clearly had an impact on the UK economy, it is no doubt that this recovery is also due to the stimulus packages set out by the government to aid many of the smaller businesses that struggled throughout this past year. Companies that would have faced dire circumstances otherwise, were helped with a series of economic aid to help them get through the worst of the pandemic’s consequences.
These things together have meant it’s been predicted that the UK economy will grow to 7.2% in 2021, which is up from the March projection of 5.1%. It is also expected that it will only take until the middle of next year for the UK to get back to pre-pandemic levels of economic activity per capita, with the UK’s growth set to be the fastest among the large rich countries. What this shows is that despite what can be called the biggest crisis in recent times, the UK’s economy has remained strong, and come out relatively unscathed economically.
Yet whilst the economy as a whole is expected to recover well, it is likely to differ between sectors. Entertainment and leisure industries, which faced heavy restrictions and suffered throughout the lockdown, are likely to see a big surge due to pent up demand. Pubs and restaurants especially, which just a few months ago were completely shut down, are now recovering at an incredible rate as the restrictions around them ease. The retail industry and town-centre shops are expected to recover at a much slower rate, especially those that have not caught up with consumers’ increasing preference for e-commerce. Industries that were unaffected by social distancing measures, such as banking, finance and utilities are likely to carry on as normal, seeing smaller surges as confidence in the market returns.
With that being said the UK is facing some challenges as it gets to grips with new trading relationships in the wake of it leaving the European Union. Short term consequences have been operational difficulties for some businesses, specifically wholesale, manufacturing and retail exporters. Yet these are only said to account for 15% of businesses as a whole, and when put into the context of the UK’s trade, are said to just be teething problems until companies get used to trading outside of the European Customs Union.
What businesses should take from this, is that there are new opportunities for UK companies domestically. Increasing trade costs with the EU allows new and existing companies to take advantage of their home market and puts them in a better position to compete on a price level with their European counterparts.
UK businesses may now have new opportunities to expand globally as the British governments create new trade deals that were otherwise unavailable in a pre-Brexit world. As the British economy is recovering faster than its European counterparts, as well as the potential for new international trade deals, it puts investors and business owners in the UK in a good position.
If you are interested in setting up or expanding your business to the UK, book a free consultation with one of our immigration specialists.