COVID-19 lockdowns has cost the UK economy £251 billion
Centre for Economics and Business Research (CEBR) forecasts suggest that, over the past year, Covid-19 has been the predominant cause behind a £251 billion reduction in the UK’s gross value added (GVA). This figure is derived by comparing our final pre-Covid forecasts from the beginning of 2020 with the most recent data on actual economic output. In other words, it is a comparison between a counterfactual scenario in which Covid-19 did not occur and the actual experience of the economy in the past twelve months.
To highlight the scale of this loss in activity, this reduction is roughly equivalent in size to the entire annual output of the South East, in pre-Covid circumstances, and nearly twice the output of Scotland.
Continuing the geographical comparisons, we can estimate the size of the Covid-19 losses in each of the UK’s regions. We find that, in absolute terms, the losses in London have been the highest, amounting to £51.4 billion of lost activity. This was followed by the South East and East of England, with losses of £34.7 billion and £26.6 billion, respectively.
Interesting findings stem from a comparison between each region’s contribution to the overall pandemic-induced loss and their contribution to UK-wide GVA in normal circumstances. This can highlight the areas that have disproportionately lost out on economic activity. For instance, while London contributed 20.5% of the overall loss in activity as a result of coronavirus, the capital contributes just under a quarter of the country’s activity ordinarily.
As such, London’s contribution to the £251 billion of UK-wide losses was smaller than expected given the size of its economy. This can be explained through London’s comparative advantage in sectors such as finance & insurance and information & communication, with these fields exhibiting some of the smoothest transitions to remote working.
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