Economic Report 2020

ECONOMIC REPORT 2020

The changing economic and energy environment

The UK and global economy — a year of rapid change

COVID-19 is firstly a global humanitarian health crisis, with more than 1.4 million lives lost and 60 million confirmed cases. 1 However, actions to control its spread have also led to an unprecedented economic crisis. This year has seen one of the most volatile and unpredictable economic environments in history, with the impact of restrictions due to COVID-19 leading to one of the largest year-on- year declines in GDP ever seen, the effects of which are likely to be felt for years to come. The International Monetary Fund (IMF) anticipates a global fall in gross domestic product (GDP) of 4.4 per cent this year 2 – a similar rate to that seen in 2009 following the global economic crisis. It is anticipated that China will be the only G20 economy to avoid recession this year. The

impact in the UK, as in other advanced economies, is likely to be more pronounced than the global average, with forecasts anticipating a potential decline of 11.3 per cent this year. This is the largest annual contraction in 300 years and will mark the first UK annual growth decline since 2009. The second quarter (April to June) saw the largest quarterly GDP contraction on record in the UK (a decline of 19.8 per cent quarter on quarter 3 and 21.5 per cent year on year), with the overall value of the economy falling to levels last seen in Q1 2003. This was, however, followed by the largest quarterly increase in Q3, at 15.5 per cent. 4 It is likely that further contraction will be seen in Q4 due to restrictions being re-established.

1 As at 27/11/2020 2 https://www.imf.org/en/Publications/WEO/Issues/2020/09/30/world-economic-outlook-october-2020 3 https://www.ons.gov.uk/economy/grossdomesticproductgdp/bulletins/quarterlynationalaccounts/apriltojune2020 4 https://www.ons.gov.uk/economy/grossdomesticproductgdp/bulletins/gdpfirstquarterlyestimateuk/julytoseptember2020

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