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

Post

NBP puts hikes on hold despite rising inflation and FX woes in Poland

The National Bank of Poland (NBP) kept its policy rate unchanged at 6.75% yesterday, undershooting consensus and our expectation of a 25pbs move. The decision took place against the backdrop of another upward surprise in inflation, which picked up to 17.2% in September, as well as mounting pressure on the PLN, not least due to the hawkish shift of AE central banks.

Find Out More

Post

Local rates and FX: Asian local currency sovereigns – not long now

The pieces are almost in place for a high conviction OW on Asian local currency debt, but not quite. Indeed, we maintain a cautious view on all EM local currency sovereign bonds, including Asia, given the relentless concern over the dollar and domestic inflationary pressures.

Find Out More