United Kingdom Economic Forecast

UK Economic Forecast

October 27, 2020

The economy likely recovered some lost ground in Q3 following Q2’s record contraction. GDP rose solidly in July and August, while retail sales were robust throughout the quarter. However, PMI data suggests the recovery lost momentum in September and early in Q4, due to the snap-back of restrictions at home and abroad. In response to tougher domestic Covid-19 measures, the government has recently ramped up fiscal support, announcing a revamped version of the furlough scheme for firms forced to close temporarily, in addition to a previously announced pledge to pay part of the wages of employees working less than normal hours. However, the support will likely be unable to prevent a sharp rise in unemployment in the coming months. On Brexit, talks with the EU have intensified in recent days. Reaching a trade deal will be vital to minimizing economic damage once the transition period ends on 31 December.

United Kingdom Economic Growth

The economy should recover next year from this year’s collapse, supported by the likely easing impact of Covid-19, and fiscal and monetary stimulus. However, Brexit disruption as the UK adjusts to more limited access to the EU market could constrain momentum somewhat. A potentially messy divorce from the EU and prolonged social distancing measures pose downside risks. FocusEconomics panelists expect the economy to expand 6.0% in 2021, which is down 0.5 percentage points from last month’s forecast, and 3.1% in 2022.

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United Kingdom Facts

Value Change Date
Bond Yield0.83-3.04 %Jan 01
Exchange Rate1.33-0.35 %Jan 01

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