Even with a post-Brexit trade deal, the UK may continue to face new problems, leading to economic growth less stellar than the prior forecast. A warning set by one of the UK’s major economic thinktanks, the Resolution Foundation.

The Resolution Foundation said that the national lockdown and tier 4 restrictions in both Scotland and Wales would lead to depressed economic growth for the UK until Easter. According to reports, they announced a 4.3% growth in 2021, as opposed to the 5.5% forecast by the Office for Budget Responsibility (OBR).

Post-Brexit UK And Its Problems

The fresh wave of coronavirus and the ensuing restrictions are the problem. Torsten Bell, the thinktank’s chief executive said that the renewed efforts to contain the new strain of Covid-19 “could mean the economy being 6% smaller than what was hoped just a month ago.”

For the first months of 2021, the UK looked a lot weaker than it seemed just a few weeks ago, when everyone was optimistic about the arrival of the first coronavirus vaccine. The sentiment alone boosted public confidence and lifted the stock markets. More than half a million people in the UK received the Pfizer/BioNTech jab, so if not for the new strain, only people over 80 and medical and care home staff would have been prone to the virus.

However, since the new, more infectious variant of coronavirus came out, London, the south-east, and the east of England were placed into harsher tier 4 restrictions instead. Other areas in England also moved into tier 4 on Boxing Day, effectively imposing the strictest sanctions on 24 million people – 43% of England’s population. Scotland, Northern Ireland, and even Wales, are now back under the strictest lockdown.

2021 UK Economy

Bell said that though it will be a hard start this 2021, the rest of the year could be a “roaring 20s” style social spending boom – just like America’s bounce back after the influenza epidemic of 1918.

He said that the death rates will soon lower as the vaccines are rolled out, consequently easing out of the restrictive lockdowns. The removal of the restrictions would then mean a boom in the hospitality industry. He also mentioned that it does not mean the economy will return to full health. Instead, he said, “Rising unemployment means household incomes may actually fall even as GDP recovers.”

The Resolution Foundation also called the pandemic a catalyst of social inequality. They noted that it favored many office workers who now work from home and made big savings while thousands of people working in both the hospitality and retail industries lost their jobs.

“Government will likely need to use fiscal policy to continue supporting the economy for longer than is currently planned. And the return of business investment requires our relationship with our biggest trading partner to be put on a considerably more stable footing.”

“2021 offers light at the end of the tunnel, but it’s going to be a bumpy ride getting there,” Bell added.