Regional projections
UK output across the regions is estimated to have contracted by between 8.9% and 10.5% in 2020. The loss of output in Wales, for example, is equivalent to each household being roughly £5,000 worse off than they were in 2019 on a net basis, compared to £12,000 in London.
We expect growth in most regions to accelerate in 2021, with annual GVA growth ranging from 2.5%-6.2% under our ‘quick recovery’ and between 1.7%-4.1% under the ‘slow recovery’ scenario.
The Southeast and London are expected to lead growth in 2021, with annual GVA growth of around 4% - 6% under our two scenarios. While being more densely populated, these regions are more resilient mainly because of the prominence of sectors like ICT and professional services, while relying less on manufacturing where working from home is not always possible. London’s younger and more active population also contributes significantly to its resilience from both an economic and health point of view.
Scotland and Wales are among those which are likely to recover at a similar rate to the UK average, while additional non-tariff barriers under the new UK-EU trading arrangement is expected to put pressure on Northern Ireland’s growth.
According to our projections, on average the UK is expected to claw back between 30% and 42% of the loss in output caused by the pandemic in 2021. This is equivalent to between approximately £2,100 and £2,900 per household. However, aggregate levels mask a more diverse regional picture. Under the ‘quick recovery’ scenario, London and the South East are expected to recover about 62% and 54% of lost output in 2020, respectively, compared to just 22% and 27% in the North East and Yorkshire and the Humber. This has significant implications for the ‘levelling up’ agenda.