Rishi Sunak is expected to announce his spring statement soon. The statement concerns the second anniversary of the previous Covid-19 lockdown. The statement by the Exchequer Chancellor comes at a time when the British economy is healing from the adverse effects of Covid-19 and the new war in Ukraine.
The economy has faced major changes in the two years since the government issued the lockdown orders to protect its citizens from the virus. As time passed, there were gradual improvements as the economy slowly recovered. The initial uncertainty and turmoil were being erased. However, British citizens are faced with another living crisis: the surge in energy prices. It is with no doubt that Vladimir Putin’s invasion of Ukraine has worsened the surge in energy prices.
“The UK is in a pre-recessionary situation, and people need to get ready for it”, reckons UK entrepreneur and “OMMG founder” Feisal Nahaboo. In an interview with Eat News, he continued to say that life will be tougher for many UK households over the next year or two than in recent memory. Expectations of a soft landing have turned out to be unfounded. Many households are now likely to feel the effects of another recession running up to 2023 brought about by the impacts of Brexit, the inflationary aftermath of the Covid pandemic, and the global destabilisation from the unwarranted Russia’s invasion of Ukraine.
In the last 100 years, Britain faced its worst economic recession during the early stages of the pandemic. This was a result of the lockdown imposed by the government. The country’s GDP dropped by almost 20% in the second quarter of 2020 and by a staggering 9.4% for the year, the worst performance ever witnessed in the G7. However, the economy’s growth rate has been commendably fast in the group of wealthy nations. This can be partly attributed to the snapback after a major fall. Nonetheless, countries like the US and France are way above their pre-pandemic levels.
Inflation has been at its highest after the Covid-19 fallout since 1992 as Russia’s invasion of Ukraine seeks to rub salt on the wound. The cost of living around the globe has risen due to several conditions, including a shortage of workers, disruption of worldwide supply chains, and high demand for goods after the Covid-19 lockdown. In addition, the UK has also suffered trade disruption thanks to Brexit. Early in the pandemic, inflation had gone to almost zero as most businesses strained to meet demands. Stimulus packages from governments and central banks were key in softening the blow on citizens. The Bank of England has predicted that inflation could reach 8% this spring. The Bank of England expects the inflation rate could peak at 10% by the end of the year.
In 2020-2021 the budget deficit of the UK government was 318 billion Euros (£263 billion): a record budget deficit. The high budget deficit occurred because the government pumped billions to help fight the virus. Since then, the national debt has risen to almost £2.3 trillion, about 95% of the country’s GDP.
As the economy recovers, it is worth noting that borrowing fell in 2021-2022. However, the levels are expected to remain higher than the pre-pandemic for at least five years.
Among all the sectors, public transport has been the slowest to pick up, and this is due to the rise of people working from home. The number of car trips around the UK is still similar to what it was in the pre-covid era. However, the usage of buses in London is only 80% of its former self. The work from home principle seems to stick even after the pandemic.
The lockdown imposed during the pandemic made most people adopt online shopping. Despite taking a fall since the reopening of streets shops, online shops have been promising to swing to higher selling rates even after the pandemic.
Statistics have shown that online spending rose from 19% in February 2020 to a staggering 37.8% in January 2021 during the lockdown. The spending was reduced in January 2022 by around 27%. Online firms continue to record profits as delivery jobs and warehouse jobs continue to grow rapidly. The change is shaping up the British streets as a wave of shop closures continues to hit the UK.
During the pandemic, there was an unusual trend in house prices. In December 2021, an average UK house was about £275,000, meaning the cost had gone up by more than £27,000 from the previous year. The housing market outside urban areas also increased as homeowners looked for more space during the lockdown period. Homeowners could ascend the property ladder to better housing, with employment levels remaining robust, helped by savings made during the lockdown period.
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