Rishi Sunak it will give its spring statement on Wednesday on the second anniversary of the initial Covid lockdown, with the economy still reeling from the effects of the pandemic and facing new headwinds from the war in Ukraine.
In the two years since the government first ordered people to stay home to protect themselves from rising infections, the country has seen huge economic changes. Initial turmoil and uncertainty eventually gave way to a gradual recovery, but now UK households are facing a worsening cost of living crisis amid high inflation and worsening energy price spikes. for the invasion of Vladimir Putin.
Britain’s economy suffered its worst recession in 100 years as the initial wave of Covid-19 and late entry into a strict lockdown brought activity to a sudden halt across the country. UK GDP plummeted by almost 20% in the second quarter of 2020 and by 9.4% for the year as a whole. worst performance in the G7.
Since then, the economy has grown at the fastest pace in the group of rich nations, in part due to recovery from a bigger slump, and returned to pre-Covid levels in December. However, other G7 nations are further above their pre-pandemic levels, including the US and France.
Inflation has risen to the highest rate since 1992 as a result of covid-19, and the Russian invasion of Ukraine threatens to exacerbate the problem. Disruption to global supply chains, shortages of workers and materials, and a boom in demand after the lockdown have led to skyrocketing costs of living around the world. In the UK, trade disruption has added to Brexit.
Inflation had sunk to near zero early in the pandemic as businesses struggled with evaporating demand. However, stimulus from central banks and governments helped soften the blow and maintain purchasing power.
With the war in Ukraine now fueling a sharp rise in world energy prices, the Bank of England expects inflation could reach 8% this spring. It has predicted that the rate could peak close to 10% this year.
The UK government budget deficit – the gap between spending and revenue – rose to a peacetime record of roughly £318bn in 2020-21 as tax revenues collapsed and the state pumped in billions of pounds in emergency support for the pandemic, such as licences, business grants and loans. .
The national debt, the sum of all budget deficits, has risen to around £2.3 trillion, or around 95% of GDP, the highest level since the early 1960s.
Loans fell sharply in 2021-22 as the economy recovers, to around £150bn, though they are expected to remain higher than pre-Covid levels in every year until at least the middle of the decade. .
The use of public transport has been slow to recover from the pandemic amid a surge in working from home. The number of car trips is close to pre-COVID-19 levels, although the number of bus trips remains at 80% and usage is lower in London.
A minority of Britons worked from home during the pandemic, with rates reaching a peak of around 48% in February 2021 – with more people in the capital working from home due to a higher proportion of office jobs than in smaller cities and towns. Figures show the London Underground is quieter on Mondays than later in the week as office staff embrace flexible working in a trend that could persist after the pandemic.
The lockdown fueled a rise of online shopping as consumers stayed away from the main street. While online sales have receded with brick-and-mortar stores reopening, experts expect a permanent shift toward higher rates of internet sales after the pandemic.
Online spending rose from about 19% of total retail sales in February 2020 to a high of 37.8% during the January 2021 lockdown, before cooling off again to about 27% in January 2022.
The change has caused a wave of store closings, changing the landscape of Britain’s high streets. Online businesses have posted windfall profits: enriching their billionaire owners – while fueling rapid growth in warehouse and delivery jobs.
House prices have soared during the coronavirus pandemic, in an unusual trend during a recession. the The median house price in the UK was £275,000 in December 2021an increase of £27,000 from the previous year.
The governments stamp holidays in England and Northern IrelandLaunched by Sunak in the summer of 2020 amid concerns of a housing market downturn, it stimulated demand.
With the help of savings accumulated during the lockdown for wealthier households able to move up the ownership ladder, and employment levels that remained strong, homeowners looking to move for more space during the lockdown also pushed the market outside the urban centers.