Regional economic recovery to face challenging start to 2021

The continuing impact of the current pandemic is expected to see Yorkshire’s economy contract by 7.1% in 2020 according to analysis by KPMG.

The firm is also warning that the economy is unlikely to be able to fully restart until a vaccine or effective treatments for the virus are available – which it is predicting for July 2021.

However with many businesses currently being bolstered via government support such as the job retention scheme – which is likely to end considerably before the economy can be fully unlocked – it’s clear there will be a lot of business restructuring moving forward. This will result in further job losses, with KPMG predicting a rise in average unemployment to 11% in 2021 – a level unseen since early 1987.

In fact the lack of job security is expected to significantly impact consumer behaviour with consumer spending down 9.5%, which will prove a further challenge for the hard hit retail and leisure sectors which are still yet to fully reopen.

Euan West

Euan West, KPMG’s office senior partner in Leeds, commented: “Like many parts of the UK, our region’s economy will be severely hampered by the uncertainty of being without a clear end to the current crisis despite a gradual easing of restrictions.

“On the upside, the dominance of the health sector in our regional economy offers some insulation from the downturn, while we are not overly reliant on the hardest hit sectors such as travel and hospitality.”

Looking forward to 2021 however its clear that recovery from this health crisis will be further hampered by another negative shock to the economy. This second shock is expected to be brought on by the end of the transition period with the EU. As a result KPMG is predicting GDP next year will only rise by 2.8%, with the caveat that this assumes the UK and EU can agree a deal before the deadline!