New lockdown set to push UK back into recession

We expect the introduction of a third lockdown to cause GDP to fall more than 4% q/q in Q1.

This is a much smaller drop than seen in Q2 2020, which is due to the less stringent restrictions this time and our expectation that output falls in in manufacturing, construction, and retail will be much milder.

Rapid rollout of vaccinations should allow GDP to rebound strongly in Q2. But the risks to the near-term forecast have become more skewed to the downside.

Topics: Coronavirus