How has the UK economy fared in the two tumultuous years since Covid?
Rishi Sunak will give his spring statement on Wednesday on the second anniversary of the initial Covid lockdown, with the economy still reeling from the effects of the pandemic and facing fresh headwinds from war in Ukraine.
In the two years since the government first ordered people to stay indoors to guard against soaring infections, the country has been through huge economic changes. Initial turmoil and uncertainty eventually gave way to a gradual recovery, but now UK households face a worsening cost of living crisis amid high inflation and a surge in energy prices made worse by Vladimir Putin’s invasion.
Britain’s economy suffered the worst recession in 100 years as the initial wave of Covid-19 and late entry into a tight lockdown caused a sudden stop in activity across the country. UK GDP plunged by almost 20% in the second quarter of 2020, and by 9.4% for the year as a whole – the worst performance in the G7.
The economy has since grown at the fastest rate in the group of wealthy nations, partly because of the snapback from a bigger fall, and returned to pre-Covid levels in December. However, other G7 nations are further above their pre-pandemic levels, including the US and France.
Inflation has risen to the highest rate since 1992 in the fallout from Covid-19, with Russia’s invasion of Ukraine threatening to add to the problem. Disruption to global supply chains, shortages of workers and materials, and a boom in demand after lockdown have led to the cost of living soaring around the world. In the UK, trade disruption has been added to by Brexit.
Inflation had sunk close to zero early in the pandemic as businesses struggled with evaporating demand. However, stimulus from central banks and governments helped soften the
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