Coronavirus pandemic cost UK economy £250 billion
The UK has missed out on hundreds of billions of pounds in gross value added over the last year, according to a new study. The figure lost as a result of the corona-induced downturn is equivalent in size to the entire annual economic output of Scotland.
A new report from The Centre for Economics and Business Research (CEBR) has estimated the global pandemic cost the UK economy well over £200 billion over the last year. The analysis released by the independent research agency suggests that London was hardest hit in absolute terms, however the impact of the crisis was worst felt in the West Midlands and East of England, due to the regions’ dependence on wholesale and retail trade.
Looking at forecasts CEBR made at the start of 2020 as to how much value added tax , before the first measures to stem the spread of the coronavirus kicked in, the researchers then compared the UK’s actual economic performance to determine the startling decline. According to that calculation, the UK economy missed out on £251 billion in gross value added (GVA) than estimated. GVA is calculated by deducting the costs of raw materials, consumables and services from third parties from the production of the entire economy – and the hefty sum CEBR states the UK missed out on is almost double the entire annual economic output of Scotland.
As is often the case with economic downturns, while the figures lost by the nation’s capital were the highest, the impact of the Covid-19 recession have been most keenly felt in other regions. London’s loss was the highest in absolute terms, with CEBR estimating the city had suffered £51.4 billion in lost business. Despite this, London's relative contribution to the total loss of GVA was smaller than expected. This is partially because the city has long boasted the best digital infrastructure in the country, making it easier for homework there, while the sectors that are important to London – such as finance and insurance – are ones that can easily switch to remote operations.
The opposite was the case in the West and East Midlands and the East of England. Relatively speaking, the losses were very large there, with CEBR citing the regions’ sectoral composition as a possible factor behind the differentials – as the economies there have a greater degree of output stemming from wholesale and retail and transport and storage – two sectors which have suffered from a number of drops in demand from staple customers; for example, they have been heavily hit by the lack of consumer footfall.
In the coming months, CEBR stated that economic production is expected to return to pre-Covid-19 levels relatively swiftly. However, despite this anticipated recovery, some regions may be more subject to lingering effects from the pandemic – such as higher rates of joblessness and a greater degree of business closures.
The report concluded, “If the Government is truly committed to addressing regional imbalance, it will not allow these areas to disproportionately bear the weight of the losses brought on by the pandemic. To do otherwise would risk further divergence in fortunes.”
The Centre for Economics and Business Research is an economics consultancy, using economics and econometrics, surveys, qualitative research, expert interviews, modelling and scenario planning to help its clients understand their environment, forecast changes in it, build robust strategies and persuade others. As a recognised independent forecasting house, the firm’s predictions for the UK are published by the Treasury and used in the Bank of England’s quarterly inflation report.
