After a turbulent couple of years, the UK economy has expanded at its fastest rate since WWII. Last year the UK economy saw a 7.5% expansion after suffering a milder hit than expected in December.
Chancellor Rishi Sunak remarked that the economy has been “remarkably resilient”, which seems apt, especially considering the last few years of economic uncertainty. This 7.5% expansion is the largest seen since 1941 and makes Britain the fastest growing advanced economy in 2021.
Key Statistics
- Despite the economy falling back in December due to the Omicron restrictions, the UK economy rebounded last year with growth of 7.5%
- Last 3 months of 2021 showed a healthy growth of 1%, according to The Office for National Statistics (ONS)
- Compared to pre-pandemic levels however, the US, Canadian and French economies were above the UK’s. Although the UK saw more growth than Italy, Germany and Japan
The impressive growth in the British economy will keep the Bank of England focused on its efforts to curb the surge on rate of inflation. More increases to the rate of interest are expected within the next few months.
The UK’s inflation rate remains high
Despite this impressive rate of economic growth, the UK has still seen a large rise in the rate of inflation. The rate of inflation, measured by the CIP, was at 4.9% in January and over the last 3 months has risen to 6.2% in March. This massive increase in inflation has led to soaring energy bills and it is hard for people who need help to repay their debts, for everyone across the UK, among other things.
Many have suggested that this steep rise in inflation has harmed living standards and pushed a number of firms towards insolvency. As it stands, the Labour Party is yet to make meaningful steps towards tackling the worsening cost of living crisis.
Has the UK economy bounced back to pre-pandemic times?
In 2020, the UK economy contracted by 9.4%. This represents a much deeper pandemic recession than comparable economies. However, the UK has also enjoyed a stronger recovery, supported by billions of pounds of government aid to support the economy through the crisis.
This year, the UK economy is forecast to outperform other G7 nations once again.
However, This is not to say that Britain has bounced back to a pre pandemic level. Britain has yet to return to its pre pandemic levels of output on a quarterly basis. This milestone has already been reached by the US and France.
Last December, the GDP was the same as its level in February 2020. GDP in the UK fell by 0.2% in December as a result of the omicron variant keeping consumers at home. However, economists forecast a decline of 0.5%.
On the whole, growth for 2021 has been above the 7.3% seen by the Bank of England. Not only did the service industry shrink less than expected, manufacturing and construction both gained.
How are the Financial Forecasts looking for 2022?
Published at the beginning of February 2022, the Bank of England forecast shows the economy stagnating in the first water. However, a strong rebound is predicted in the following 3 months, allowing the UK economy to return to pre-covid size.