Economic outlook for 2022 not all doom and gloom – PwC

There was some good news for the UK economy from the latest economic outlook from PriceWaterhouseCoopers.

The multinational firm, in its latest economic insight, said it expected the UK economy could reach its pre-COVID level by the end of the year and achieve an annual GDP growth rate of between 7.0 per cent and 7.1 per cent.

The report, released on Tuesday (4 January) said headline GDP growth in 2022 could be between 4.5 per cent and 5.1 per cent but this is largely driven by base effects.

PwC chief economist Dr Jonathan Gillham said the annual growth figures in the first half of 2022 are expected to be skewed as the economy comes off its low base due to the national lockdown in early 2021.

“We then anticipate GDP growth to slow down in 2023 as the economy returns to its pre-pandemic trend. By the end of 2022, the UK economy is likely to be roughly 1 per cent to 2 per cent above the pre-COVID levels. From 2023 onwards, the pace of growth is projected to slow down further as base effects fall out of the annual figures. Under our two scenarios, we expect growth could range between 1.3 per cent and 1.8 per cent in 2023,” he said.

However, the economic recovery is set to be rocky for some sectors including lower-income households, and regions that relied heavily on manufacturing.

“Lower income households are squeezed, especially those struggling to retrain and reenter the workforce post furlough, while higher income households have the potential to spend,” Mr Gillham said.

“Growth in the hospitality sector is projected to continue accelerating in a fully opened economy while output from other sectors, like construction and manufacturing, is expected to be moderated by workforce shortages, supply bottlenecks, and weakening demand and business confidence.

“At the regional level, the pandemic has resulted in the most severe regional disparity in output in the past 50 years, with the West Midlands, and the South East underperforming due to their heavy reliance on manufacturing, retail and wholesale, while Northern Ireland is the only region where economic growth has exceeded both expectations and the pre-crisis levels. We expect this polarisation to be one of the key drivers behind the UK’s low-growth prospects, and may be one of the core factors affecting growth over the medium-to-long term.”

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