UK GDP growth
The UK economy could reach its pre-COVID level by the end of the year. We expect the UK economy to end the year with an annual GDP growth rate of between 7.0% and 7.1%. This is largely similar to our previous forecasts made in July.
Headline GDP growth in 2022 could be between 4.5% and 5.1% but this is largely driven by base effects. The annual growth figures in the first half of 2022 are expected to be skewed as the economy comes off its low base due to the national lockdown in early 2021. Core underlying growth will continue to be relatively modest, continuing the low-growth trend we have seen this year driven by the normalisation of economic activity.
We then anticipate GDP growth to slow down in 2023 as the economy returns to its pre-pandemic trend. By the end of 2022, the UK economy is likely to be roughly 1% to 2% above the pre-COVID levels. From 2023 onwards, the pace of growth is projected to slow down further as base effects fall out of the annual figures. Under our two scenarios, we expect growth could range between 1.3% and 1.8% in 2023.
We expect the uneven impact of the pandemic to continue as the recovery is increasingly polarised across sectors, regions and households. Lower income households are squeezed, especially those struggling to retrain and reenter the workforce post furlough, while higher income households have the potential to spend. Growth in the hospitality sector is projected to continue accelerating in a fully opened economy while output from other sectors, like construction and manufacturing, is expected to be moderated by workforce shortages, supply bottlenecks, and weakening demand and business confidence. At the regional level, the pandemic has resulted in the most severe regional disparity in output in the past 50 years, with the West Midlands, and the South East underperforming due to their heavy reliance on manufacturing, retail and wholesale, while Northern Ireland is the only region where economic growth has exceeded both expectations and the pre-crisis levels. We expect this polarisation to be one of the key drivers behind the UK’s low-growth prospects, and may be one of the core factors affecting growth over the medium-to-long term.
Download Full Report: PwC-december-2021
