Covid-19 has catapulted the UK economy into further uncertainty, adding to the volatility already caused by Brexit. The next few months will be critical to the UK’s economic recovery, as the country emerges from lockdown, and finalizes its post-transition trading relationship with the EU.
This research service has been designed to help clients develop visioning scenarios and gain deeper insights into the general macroeconomic conditions in the UK. The research has been divided into four sections: macroeconomic outlook for the UK; the impact of COVID-19 on the macroeconomic outlook; the impact of Brexit on the macroeconomic outlook; and industry outlook. The GDP growth trajectory for the UK has been assessed under the scenarios of both a first and a second wave of COVID-19. The standard model assumes that there is no second Covid-19 wave, with a no-deal Brexit being avoided. A full recovery to pre-COVID-19 GDP levels is expected by Q1 2022. The growth prospects for 2023 to 2025 are more positive. The elimination of all Brexit-related uncertainty by this timeframe and expectations of strong government reforms in a post-Brexit world should help drive growth. COVID-19 and Brexit and their resultant disruptions to trade and supply chains should drive a shift away from just-in-time manufacturing while encouraging higher domestic production. The recent rejection of the Brexit transition extension has created more uncertainty in recent weeks. The UK is now expected to most definitely exit the Brexit transition period by 31 December 2020 and enter into a new trading and migration relationship with the EU starting January 2021 (closer to November 2020, however, there is still the slim possibility of the UK could seeking an extended transition period again, especially if sufficient progress is not made in UK-EU trade negotiations). Key industries analyzed as part of this research include the automotive, healthcare, and financial services industries. COVID-19 is expected to prompt near-medium-term shifts, such as stronger demand for used cars and increased private healthcare contracting. A significant part of the research also focuses on identifying key growth opportunities amid the ongoing volatility. In terms of growth opportunities, timeline-to-action, call-to-action, and impact groups have been analyzed.
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