The past 18 months have been tough financially, and while lockdown proved essential for our country’s health, there was always going to be an economic cost.
Companies and individuals alike have had to tighten the purse strings and embrace frugality to weather a storm of business closures and unemployment – but now there are signs that the economy is starting to bounce back.
With lockdown lifting and schools reopening, the Bank of England was hoping that the economy might grow by as much as 5% from April to June this year. Economic growth is measured by gross domestic product (GDP). GDP is simply the sum total of all goods and services produced by a country within a certain time frame. While the British economy didn’t quite reach the target of 5%, we did see a 4.8% growth from April to June, which should be a strong indication that our finances are on the mend.
Overall, this means that our economy is still 4.4% smaller than it was before the pandemic hit – hardly a surprising result when you consider the huge changes that we’ve had to make during the past year and a half. However, the prospects look good. Leading UK economists have suggested that we might return to our pre-pandemic state before the end of 2021.
So why is the growth of the economy important? Typically, a larger economy will lead to a range of benefits, both for individual households and for society as a hold:
- A healthy economy means lower unemployment as well as better wages for those who are employed
- Better rates of employment and more consumer spending allows the government to raise more income from taxes. This means that they don’t need to borrow as much money, and can often lead to an improvement in public services
- Research has found links between economic growth and increased life-expectancy, perhaps due to the fact that a better economy helps to improve living standards and reduce inequality.
For all these reasons, it’s important that British GDP rebounds as quickly as possible. Countries across the world are currently facing the same issues, and this will be a global challenge to overcome as we move into the latter half of the year.
An economy can only grow if businesses are able to open, offering employment for their workers and opportunities for people to come out and buy products and services. At the moment, businesses are experiencing a post lockdown boom – those who have been stuck inside over the winter are rushing out to restaurants, enjoying nights out and taking the opportunity to visit physical shops.
The hope is that health measures such as COVID-19 vaccination and improved treatment options will allow governments to put their focus into economic recovery where previously they have needed to prioritise public health. However, with the pandemic still a very real concern, there will also need to be a measure of caution. If spikes in infection rates lead us to further restrictions, then it’s likely the economy will shrink again. For now, though, the signs are looking positive.