Strongest growth since 1941: British economy recovers rapidly

Britain’s economy grew faster last year than it has in many decades. In the coming months, however, high inflation and expensive energy are likely to slow down the economy.

The British economy grew faster last year than at any time since the Second World War. The gross domestic product of the fifth largest economy in the world increased by 7.5 percent, as reported by the ONS statistical office. That’s the strongest gain since 1941, with Britain outperforming the other major industrial nations. However, the country’s economy collapsed by a particularly severe 9.4 percent in the first pandemic year 2020.

For comparison: the German economy posted an increase of 2.8 percent last year after it had plummeted by 4.6 percent in 2020 due to the Corona crisis. Meanwhile, Great Britain’s exit from the EU has left clear signs of the brakes on German-British foreign trade.

The UK economy grew 1.0 percent quarter-on-quarter in the fourth quarter. Economic output in December was roughly at the pre-crisis level of February 2020, it said. Finance Minister Rishi Sunak praised his country’s economy as “surprisingly resilient”. This is also due to the relief measures taken by the government.

Less growth expected

In the current year, however, growth is likely to weaken significantly. The International Monetary Fund (IMF) expects an increase of 4.7 percent, in 2023 it should go up by 2.3 percent. “The UK economy faces a much weaker 2022 as the crippling burden of rising inflation, expensive energy bills and higher taxes for consumers and businesses dampen activity,” said Suren Thiru of the UK Chamber of Commerce.

Economists are assuming that the inflation rate will rise above the seven percent mark in the coming months and thus even further overshoot the central bank’s target of 2.0 percent – to the dismay of the Bank of England. In December, it was the first of the major central banks to raise the key interest rate by 0.25 percentage points since the beginning of the pandemic. At the beginning of the year there was a further step to 0.5 percent.