With the vaccine programme successfully rolling out and restrictions lifting across the UK, many businesses are looking to what the future might hold. Many have been hit hard by the pandemic, with low footfall and decreases in demand leading to a prolonged struggle. In fact, the Organisation for Economic Co-operation and Development (OECD) reported that the UK economy was among the hardest hit by the pandemic.
Why then does the future look bright for the UK? The OECD recently reported that the UK economy is likely to grow 7.2% in 2021, 1.3% higher than the global average. This article will look at the factors why and how the UK in particular is set to have a relatively rapid recovery from this global crisis.
A service economy
The UK economy is a service economy, with 71.26% of its GDP from the service sector. Which means that when services closed due to the pandemic it had a more dramatic impact on the economy, in comparison to other European countries who have a stronger industrial and manufacturing sector. Consequently, when things open up as they are now doing, we are seeing it have a more significant positive impact on our economic growth, which reflects the statistics from the OECD. What I mean by a service economy really is just a consumer economy; the more we consume the more our economy grows. Retail, hospitality and tourism are all vital sectors to the UKs economic performance and these are the industries that suffered the most during the pandemic, but are now beginning to thrive once more.
Tackling the issues
It’s been a clear priority of the current British government to get businesses up and running again. No matter your political leanings, it must be said that Britain has a history of keeping its economy rolling forward after weathering crises. It has done this through taking the necessary measures, providing support where possible to both individuals and businesses alike.
The success of the vaccine rollout is a clear example here. By providing the infrastructure required to deliver a speedy programme, restrictions have been able to gradually lift and each time they have done so, there has been a spike in economic growth.
The furlough scheme is another example of the much needed support the government has provided. Not only did it mean businesses could be much more flexible with how they maintained their employee roster through the disruption, it meant many individuals were able to keep their jobs and an income when they might not otherwise have been able to.
Pent Up Demand
Without diving too deep into the economics, the crisis forced families to stop spending on their usual outgoings. For many this pushed savings up as purchases were delayed. Now with restrictions beginning to lift, many households are eager to return to normal, with the benefit of having some savings in the backpocket. Predictions vary, as some suggest our behaviour around how we spend our money has become more cautious, but many already show a spike in spending.
As hospitality restrictions eased earlier this year, Britain’s service sector experienced its fastest monthly growth in more than seven years. This spike in demand has led to companies reinvesting in the capacity and capabilities, including a boost in employment, with widespread staff shortages in the sector. While British businesses themselves are extremely resilient from overcoming crises before, the recovery will be driven by consumer behaviour.
A Green Economy?
Whilst our economy relies on our own consumption to succeed, the question of what and how we consume is now high on the news agenda. A lot has been said about the need to ‘build back better’. There is a sense that existing metrics of economic success are outdated. Gross domestic product is not a sustainable measure.
The UK government has made ambitious targets for reaching net zero and is committed to investing in a green economy. Consumers are also on board, buying into sustainable brands and products with purpose like never before.
It has permeated every sector; fast fashion is fast going out of fashion. We will all be driving electric cars in a generation, veganism has hit the mainstream and buying British and buying local is once again on trend. These areas are all seeing rapid growth and helping businesses bounce back.
A centre for artisan businesses
While the UK was arguably the first industrialised nation in the world, the last few decades have seen the continued rise of craft industries. The top end quality provided by these premium brands companies stand out on a global market and span a wide variety of sectors. From well known brands such as Aston Martins and Burberry, to the independent leaders in their field such as these independent chocolate brands or world class piano craftsmanship, these totally unique industries call Britain their home. They have survived and will continue to do so as their services are truly world leading.
Not only is the UK a hub of independent and innovative businesses, there is a culture of collaboration. A prime example in the hospitality sector is the partnerships of craft suppliers with local restaurants, such as Salcombe Brewers and Plymouth restaurant Rockfish. By collaborating on everything from marketing to sustainability efforts, these like-minded brands working together creates a mutually accelerating effect for all involved in the partnership.
UK businesses have weathered a lot in the last 12 months, but after learning some harsh lessons, they have come out the other side stronger. They are not only more resilient to further inevitable disruptions but the strategic insights learned have set them up for a speedy recovery as stability and greater certainty return.