The economy looks like it did in 2002 and the recovery will not be quick, says RSM UK

Simon Hart, International partner for RSM UK says: ‘The latest sustainability report from the Office for Budgetary Responsibility and the latest GDP monthly estimate from ONS released yesterday, support our opinion that the UK’s economic recovery will be more like a ‘swoosh’ than a ‘V’ - it will be elongated and might take up to 5 years to recover lost ground.

‘The drop in UK productivity in April 2020 has taken the UK’s economy back to where it was in July 2002, reversing 18 years of growth.  As stated in the OBR sustainability report, we have experienced the largest drop in GDP for 300 years with the highest borrowing level since WW2. To put this in context, after the Spanish Flu pandemic of 1918-19, straight after WW1, our borrowing ranged between 150-180 per cent of GDP and during WW2 is was at some 250 per cent of GDP. It is currently expected to be at over 100 per cent of GDP due to coronavirus driven Government support.

Graph showing economic growth from 1997-2020

However, it seems that the economic freefall might have ended with a rise in GDP of 1.8 per cent in May. Although that is hardly a ‘bounce back’ it might well be the start of the slow path of recovery.

‘For middle-markets companies, this suggests they need to consider resilience in their forecasting and funding over a longer term. The most adaptable and well-resourced will be in the best position to survive, innovate and increase productivity. Home-shoring and near-shoring is becoming more important for many in order to de-risk and secure supply chains and services closer to the UK. And business leaders should be looking into new markets whilst considering the impact of the current international trade negotiations and Brexit border controls.’ 

Related services

Coronavirus: adapting to change

As coronavirus lockdown restrictions ease, businesses across the country are faced with a period of reactivation and reimagination.

What does the 'new normal' look like for your organisation?

Find out more