The UK economy shrank more than any other G-7 last year, and the Bank of England said it would be the country’s biggest economic downturn in more than 300 years.
What went wrong? The shutdowns have hurt the UK more than the rest of the Group of Seven Advanced Economies, in part because it is particularly dependent on consumer spending, which has evaporated among one of Europe’s deadliest outbreaks of Covid-19. The economy was already weak after four years of negotiations for Britain’s exit from the European Union, during which business investment hung and households kept spending.
This is the starting point for Britain’s new relations with the EU, which began on 1 January with a free trade agreement. Earlier this month, Prime Minister Boris Johnson announced another blockade across the country to fight a new, more contagious version of the coronavirus. This puts the British economy on the verge of shrinking again in the first quarter of the year, when businesses also need to familiarize themselves with the new European trade arrangements.
Growth in the UK has already been weak, turning into a pandemic due to weak business investment, poor productivity and meager income growth. After the coronavirus broke out, the British economy shrank more than its G7 peers in the first nine months of the year. The data for the last quarter, which should be prepared on February 1
The UK has been hit harder because around 13% of its annual gross domestic product comes from leisure and culture spending, as well as in restaurants and hotels, which is higher than in any other G7 country. . Businesses that depend on direct contact with consumers – bars and restaurants, sporting events, hotels and theaters, cinemas and museums – were horrified when social distancing became the norm and the spread of the virus forced them to close. The current blockade, which runs until mid-February, closes schools and insignificant shops, and people are told to leave their homes only if necessary.