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Forecasts for the UK economy and its households

The Omicron variant gave the UK a lousy start and dominated inflation, weak growth, and increasing bills.

Britain’s economy is starting the new year weaker. High numbers of coronavirus and stricter restrictions pushed by the Omicron variant shadow the growth outlook.

It comes after a weaker growth rate at the end of 2021 as companies and households come under pressure from rising energy bills. It drove up inflation and shortages of employees and materials.

GDP

Economic activity has decreased since the appearance of the Omicron variant. People became cautious because of the high infection rates and renewed government restrictions. Economists warn a hit would lead GDP to decline at the beginning of 2022. It comes with the economy at just 0.6% below its 2020 level.

Before the new Omicron strain appeared, OECD forecasts suggested that UK growth would slow from 6.8% in 2021 to 4.8% in 2022.

Previous pandemic waves have shown a successively slighter hit to GDP than the first phase of the emergency. During the first phase, the economy collapsed by a fifth in a single quarter at the beginning of 2020.

At the same time, there is excessive tension over the severity of the new Omicron variant. In the meantime, households and businesses face additional challenges from increasing prices and supply stoppages. This process also drags on the economy.

Inflation

The highest inflation rate for a decade hit British households and companies. At the same time, the adverse results from Covid-19 push up the price of raw materials. Besides increased costs, this process causes turmoil and delays to global supply chains. Many countries worldwide face these issues and suffer from high costs. Overall, the world faces the same challenges that will take a long time to restore.

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