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UK economy savaged by the Omicron variant in December

UK economy savaged by the Omicron

Though GDP increased by an estimated 7.5% in 2021, following a 9.4% fall in 2020, the Omicron variant savaged the retail and broader services sector in December.

The UK’s high streets became ghost towns and that’s reflected very clearly in the latest snapshot of the economy.

ONS director of economic statistics, Darren Morgan, said: “GDP fell back slightly in December as the Omicron wave hit, with retail and hospitality seeing the biggest impacts.”

While growth in 2021 as a whole was the fastest since ONS records began in 1948, it has to be put into context, specifically the fact that it came after a record 9.4% slump in the economy in 2020.

In short, any growth in 2021 would have looked strong in comparison.

Predictably, Chancellor Rishi Sunak was upbeat, adding that “thanks to our £400 billion package of support and making the right calls at the right time, the economy has been remarkably resilient, with the UK seeing the fastest growth in the G7 last year and GDP remaining at pre-pandemic levels in December.”

But the upbeat tone of the Chancellor rings hollow given the challenges that lie ahead.

While the Omicron variant is now in retreat, it has been replaced by soaring inflation, rising interest rates and raw material costs, skyrocketing energy bills, supply chain issues and looming tax rises. Brexit fallout is also starting to bite.

Most economists agree that we are now at the business end of the pandemic and, to make matters worse, businesses are now having to stand on their own two feet, with little if any Government support.

Volatility in UK and global markets is set to be the defining narrative of 2022 as a variety of major macroeconomic pain points converge.

In the UK, the ISA season is going to leave a lot of investors scratching their heads as to where, and in what asset class, to invest. The level of uncertainty is off the scale.

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