National Institute Economic Review

World overview: Forecast summary

  • Increases in tariffs and uncertainty about both future tariff impositions and their potential implications for production activity have continued to have negative effects on global trade and industrial production.
  • Several central banks, facing below target inflation, have loosened monetary policy to mitigate the effects of slower economic growth and a deterioration in the prospects for trade. While we expect that further monetary loosening will occur, fiscal policy could be more effective in boosting demand.

Prospects for the UK economy: Forecast Summary

  • The economic outlook is clouded by significant economic and political uncertainty and depends critically on the United Kingdom’s trading relationships after Brexit. Domestic economic weakness is further amplified by slowing global demand.
  • We would not expect economic activity to be boosted by the approval of the government’s proposed Brexit deal. We estimate that, in the long run, the economy would be 3½ per cent smaller with the deal compared to continued EU membership.

COVID-19 impacts on destitution in the UK

We use microsimulation combined with a model of the COVID-19 impacts on individuals and households to obtain projections of households in destitution in the United Kingdom. The projections are estimated at two levels: aggregate quarterly for the UK, for all quarters of 2020; and annual for 2020 differentiated by region, sector and household demographics. At the aggregate level, destitution is projected to be about three times higher than the non-COVID counterfactual level in 2020Q2, as well as substantially higher than the non-COVID case for the remainder of the year.

Living with Covid-19: balancing costs against benefits in the face of the virus

This paper analyses the costs and benefits of lockdown policies in the face of COVID-19. What matters for people is the quality and length of lives and one should measure costs and benefits in terms of those things. That raises difficulties in measurement, particularly in valuing potential lives saved. We draw upon guidelines used in the UK for public health decisions, as well as other measures, which allow a comparison between health effects and other economic effects.

Reconciled estimates and nowcasts of regional output in the UK

There is renewed interest in levelling up the regions of the UK. The combination of social and political discontent, and the sluggishness of key UK macroeconomic indicators like productivity growth, has led to increased interest in understanding the regional economies of the UK. In turn, this has led to more investment in economic statistics. Specifically, the Office for National Statistics (ONS) recently started to produce quarterly regional GDP data for the nine English regions and Wales that date back to 2012Q1.

Regional disparities in labour productivity and the role of capital stock

This paper reports on the availability of regional capital stock data, in the form of new/updated regional (NUTS2 level) capital stock estimates, building on an approach (Perpetual Inventory Method) which had been previously developed for the European Commission. The particular focus here is on the UK and how these data are used to shed light on regional labour productivity disparities. Using a NUTS2 level dataset constructed for the period 2000–16, we use a dynamic spatial panel approach from Baltagi et al.

Understanding regional economic performance and resilience in the UK: trends since the global financial crisis

We investigate economic resilience of UK regions before, during and after the 2007/8 global financial crisis. We date business cycle turning points in real output, employment and productivity to assess the resilience dimensions of resistance, recovery and renewal and rank the economic resilience of regions in a resilience scorecard. Our empirical results reveal that the business cycle in productivity has not returned to its pre-recession peak level for Yorkshire and the Humber and the employment level has not recovered in Scotland.

UK interregional inequality in a historical and international comparative context

This paper explores the nature and scale of inter-regional and inter-urban inequalities in the UK in the context of international comparisons and our aim is to identify the extent to which such inequalities are associated with strong national economic performance. In order to do this, we first discuss the evolution of UK interregional inequalities relative to comparator European economies over more than a century. We then focus specifically on comparisons between the UK and the reunified Germany.

Introduction: The Prospects for Regional Disparities in the UK in Times of Brexit and Covid-19

Regional or spatial inequalities are a concern in most (if not all) countries and with the current ‘levellingup’ agenda they are also a priority of policymakers in the UK. Most often spatial inequalities are analysed as differences in GDP per capita or productivity at some subnational level of aggregation (e.g. regions, cities, local authorities). However, regional inequalities can have many dimensions, not all of which are apparent in standard macroeconomic measures of the economy.

Prospects for the UK Economy

  • The combination of the Covid-19 pandemic and the public health measures taken to limit its spread here and overseas are forecast to contribute to a fall in GDP of 10 per cent in 2020.  The level of economic activity in the final quarter of last year is not likely to be regained much before the second half of 2023, and Bank Rate is not likely to rise before then.

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