Plan B curbs to put downer on otherwise historic year for UK economy

The re-emergence of Covid-19 restrictions put a downer on an otherwise historic year for the UK economy, reveal new forecasts released today.

The imposition of Plan B measures throughout December in a bid to tame the rapid spread of the Omicron variant caused the British economy to contract in the final month of 2021, according to City economists.

A sharp reduction in Brits spending at pubs, bars and restaurants over the traditionally busy Christmas period will cause output to contract 0.6 per cent in December, both Deutsche Bank and Pantheon Macroeconomics are betting.

The government ordering employees to work from home over the festive period “depressed” GDP growth in December, Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said.

Three separate estimates are published by the Office for National Statistics on Friday which will measure UK output on a monthly, quarterly and annual basis.

Despite the poor December, the economy is expected to have expanded at the fastest rate in peacetime.

Deutsche Bank thinks GDP grew 7.3 per cent in 2021, meaning the UK has the fastest growing economy in the G7.

However, this is partly due to the UK suffering a sharper economic shock from the Covid-19 crisis, meaning it had more output to recover.

On a quarterly basis, output is thought to have jumped 1.1 per cent, Deutsche Bank said.

Worryingly, the economy will lean into a protracted period of sluggishness this year, ignited by the worsening cost of living crisis eroding Brits’ living standards and triggering a pull back in consumer spending.

Tombs said he expects “GDP to rise only sluggishly in H1 2022, due to the mounting pressure on households’ real disposable incomes.”