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British Economy Could Grow by 4.3% in 2021

With the Brexit deal agreed and the coronavirus vaccine programme started, people are starting to look ahead to see what 2021 might have in store for the British economy. The latest prediction suggests a more modest increase than previously stated, with 4.3% growth over the coming year.

What Are the Numbers Like?

As the stock market stages a strong recovery, the news on the overall UK economy is a bit less positive. The Resolution Foundation released their current prediction, and it shows that the economy may grow more slowly than previously anticipated, due mainly to the on-going restrictions across the country.

Among the key points, the think tank believes that the British recovery will now be slower up to Easter, leaving it 6% smaller at this point than had earlier been predicted. However, they still think that the roll-out of vaccines will provide a boom in the hospitality industry, as people start travelling and eating out again.

Torsten Bell is the chief executive of the Resolution Foundation, and he said that the early months in 2021 could still “require tougher lockdowns”, meaning that the economy could be 6% lower by Easter than what they had predicted just a month earlier.

Their 4.3% estimate for the full year is significantly lower than the 5.5% that the Office for Budget Responsibility has forecast for 2021. Bell went on to suggest that the government should “better target support on the firms most affected” as well as continuing the furlough scheme to allow self-isolation.

He concluded that there is “light at the end of the tunnel” in 2021, but believes that it will be a “bumpy ride” to get there. At the time of writing, over half a million British people have received the covid-19 vaccine, but the discovery of a more easily-spread variant has led to harsher restrictions and has eroded confidence of a quick recovery.

Could 2021 Be the Start of the Roaring 20s?

Some analysts have suggested that the end of the pandemic could lead to a spending boom, as the world enters a type of roaring 20s era similar to a century ago, when the end of World War I and the Spanish Flu produced a period of freedom and partying.

With the expectation that death rates will begin to drop fairly steeply as the vaccine reaches more people, the lifting of tiered restrictions should lead to more of us spending money on hotels, pubs and restaurants.

This will be helped by the fact that the rate of saving money has tripled in the country’s most affluent families in 2020. However, the Resolution Foundation thinks that employment will continue to fall at the start of 2021.

With the benefits of the return to economic growth not shared out equally over the full economy, some sectors could continue to suffer and rely on the debt collection process for longer. In fact, the think tank believes that household income numbers could drop while the nation’s GDP begins to rise again.