Webinar – UK Economy Post COVID: One Year On
On 19 May, the UK India Business Council (UKIBC) hosted a webinar discussing the UK economy one year on post COVID.
The session was chaired by UKIBC Marketing Manager Emma Lynch and UKIBC Director Chris Heyes with expert speakers Henk Potts, Director of Investment Strategy at Barclays Private Bank; Arif Ahmad, Partner at PwC; and Piusha Bose, Counsel at Freshfields Bruckhaus Deringer.
Last summer, UKIBC examined the immediate impact of COVID-19 on the UK economy and specific sectors (summary here). This week’s session provided an update on those key points and shared new developments that have come to fruition.
Henk addressed the long-term effects of the UK’s fiscal response, the key economic forecasts for the rest of the year, the threat of inflation, and thoughts around the outlook for the UK economy. The controlled lift of restrictions has helped alleviate some of the economic pressure in a number of economies. However, the surge in infections certainly weighed in on the drop in growth near the end of 2020 and the start of 2021.
Growth in the UK is expected to increase at the highest rate since the post war era, and the outlook for the UK economy is certainly improving with the successful vaccine programme, the reopening of the economy, robust household consumption, and a projected peak level of unemployment. Henk noted that payrolls are perhaps rising for the first time since the beginning of the pandemic, although they are still lower than those prior to the pandemic.
There is confidence in a robust economic rebound, driven by consumers in the second half of 2021. Policy will remain on hold with some longer-term restrains on fiscal policy such as higher taxes and lower government spending in the future. Henk assured participants that the UK government will continue to remain incredibly supportive.
Arif also acknowledged the exponential growth projected for 2021, but also added that even with that growth, overall GDP at the end of 2021 is still likely to close below pre pandemic levels. This last year fundamentally changed people’s views on how we work and where we live, which has directly resulted in the decline in London’s population.
As things begin to open up, we are likely to see more distress come into the economy later this year as some of the government support measures, such as the furlough scheme and government loan schemes, taper off. The gender and ethnicity pay gap is likely to increase as many of the sectors where these demographics are typically active were highly effected by the pandemic.
Arif mentioned the focus on macro trends, many of which now have a ‘build back better’ mentality; he added COP26 will surely build momentum around this area. The UK Government is also taking a step of assuring growth through a paper which sets out where it sees that growth coming from across three key pillars: infrastructure, skills, and innovation.
Piusha detailed trends in global M&A, as well as UK M&A, noting that deals recovered strongly by the end of 2020. She then examined a few of the factors driving current M&A trends, including volatility and uncertainty; vaccine roll out; and the return to normalcy. Initially, people worried about the effect of virtual M&A transactions, but it has been a smooth adjustment and no longer is considered a large factor affecting M&A.
Some of the key sectors in M&A mentioned were TMT, transport and infrastructure, and energy. Piusha went on to address SPACs, which have been one of the principal drivers in global deal making. US SPACs have now been looking at oversees targets as well, in fact, in the past three months there have been more oversees targets than in the past 20 years combined. This SPACs and de-SPACs story is becoming a global phenomenon.
Piusha closed with her outlook for 2021. The pandemic continues to be the biggest threat to business with its effects continuing through 2022. Positively, this lockdown has resulted in more resilience and an enormous demand for acquisitions. As for the momentum seen around M&A over the second half of last year and the first quarter of this year, it is expected that will continue through the year.
Many thanks to our exceptional speakers for providing their time and resources for this webinar. If you were unable to join our session on the day, or would like to go through the webcast again, we invite you to watch the webinar below for the discussion in full.