Beyond Brexit: Outlook and Risks for the U.K Economy

Alessandro Pedrazzini - March 2, 2021

The path of UK economic output in 2020 mirrored that of the eurozone. In the first half of the year, a deep contraction preceded a sizeable rebound in the third quarter as virus restrictions were partially eased. In the summer, the government’s ”Eat Out to Help Out” initiative to support the hospitality industry, paired with VAT cuts for the most disadvantaged industries, provided additional support. However, as countries introduced tighter restrictions to combat the spread of the COVID 19 pandemic, the UK’s economy contracted again in the fourth quarter. The most significant difference between the eurozone and the UK is that the UK experienced a more pronounced recession in 2020. This is mainly due to the fact that sectors most focused on social activities such as leisure, hospitality and tourism account for a greater share of the economy than in most other European countries.

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