Challenging year ahead

Professor Frank Peck discusses the effect of Covid-19 on the Cumbrian economy and whether 2021 can be any better? As we greet the New Year, we can look back on the extraordinary events of 2020 and consider the prospects of recovery in 2021. At the time of writing (early December), the latest forecasts for annual growth in 2020 range between -8.9% and -12.4% with an average expectation of -11% (HM Treasury Forecasts for the UK Economy: comparison of independent forecasts, No 400, November 2020.). To put this in perspective, this far exceeds the declines recorded in all recent major recessions in the UK. In the period since 1945, “significant” year on year declines in GDP have been recorded during the oil crisis of 1973 (-2.5%), manufacturing decline in 1980 (-2%), and more recently during the 2009 financial crisis (-4.2%). None of these even approach the experience recorded in 2020. The forecasts for 2021 suggest recovery, with an average forecast of +4.8%, ranging from optimists that estimate +7.6% while pessimists suggest flatlining at around 0.7%. Unlike most previous recessions, experts are clearly not expecting a rapid bounce-back.