Research Briefing | Jun 14, 2021

UK | Why the pandemic scars won’t run so deep

Why the pandemic scars won’t run so deep

We now expect the scarring effect from the pandemic on the supply-side of the UK’s economy to be much more limited – a 1% permanent cut to GDP compared to our original estimate of 2.6%. But we still forecast UK GDP growth will average a relatively modest 1.4% a year through the 2020s.

What you will learn:

  • The resilience of the labour market is key to our estimate of more limited scarring.
  • We think unemployment may have peaked already at a little more than 1ppt above its pre-pandemic level, limiting hysteresis effects, while recent ONS data suggests there has not been a mass exodus of foreign-born workers.
  •  We think the UK’s large negative output gap will persist for some time, so the risk of a rapid recovery triggering a sustained rise in inflation is low. We also think the repair job for the public finances is smaller than the OBR estimates.
Back to Resource Hub

Related Services

Office building in London

Post

High debt costs suggest European office price correction

Our analysis suggests a 10% correction is needed on average for the major office markets in Europe to compensate for the higher cost of debt, with prime yields required to soften by 10bps-75bps to generate a low-risk interest coverage ratio at a reasonable LTV.

Find Out More

Post

Why an ageing population doesn’t mean soaring inflation

What’s the future for inflation? Joachim Nagel, the new president of Germany's central bank, believes the rapidly ageing global population will play a key role – ramping up pressure on prices in the medium term. While we agree slowing labour supply will stifle output growth, in his recent discussion Nagel failed to fully consider the demand side of the argument.

Find Out More