United-Kingdom – After a not-bad Q1, the recovery is looking strong
- Growth held up in the first quarter
- Domestic demand more resilient against the pandemic restrictions
- Foreign trade was severely disrupted by Brexit
- Health crisis as of 17 May 2021
- Economic overview
GDP fell 1.5% quarter-on-quarter in the first quarter of 2021, in line overall with our forecasts and the consensus (-1.6%). It sits 8.7% below its pre-crisis level from the fourth quarter of 2019, a gap comparable to what is observed in Spain (-9.4%), but much more negative than in France (-4.4%) or Germany (-4.9%). Year-on-year, GDP declined 6.1%.
Exports of goods to European countries fell 18% quarter-on-quarter in the first quarter, while those to non-European countries grew 0.9%. This divergent trend likely reflects the impact of regulatory and customs controls imposed by the EU on 1 January, as well as the repercussions of the inventory-building that took place in the month prior to Brexit. While imports of goods from the EU fell by 22% quarter-on-quarter) imports from non-European countries posted a much more limited decline (-4.1% quarter-on-quarter), in line with weakened domestic demand. The recovery that began in February in the service sector is expected to sharply accelerate with the easing of restrictions. The sector’s first-quarter decline (-2%) is mainly due to severe drops in the sectors directly affected by the restrictions, namely education, wholesale and retail, and hospitality (which all together contributed -2 percentage points to quarterly variation in the sector). Manufacturing, which saw a setback in the quarter (-0.8%) after being up two quarters in a row, also bounced back in February in March, leaving a positive 1.9-point carry-over effect for growth in the second quarter.Slavena NAZAROVA, Economist