The Channel Islands are better placed than many jurisdictions in dealing with the ongoing economic risks and uncertainties brought about by the pandemic and Brexit. So says EY, following the publication of its latest EY ITEM Club Winter Forecast.
According to the report, the UK economy looks likely to avoid a double-dip recession thanks to a better than predicted performance in November 2020.
With the economy contracting by just 2.6% in November, despite the impact of a month-long England-wide lockdown and other restrictions across the UK, the EY ITEM Club now expects the economy to have had a flat performance across the fourth quarter.
While the latest Covid-19 restrictions are expected to cause a 3% to 4% contraction in Q1 2021, the absence of a contraction in Q4 2020 means the UK may, just, avoid its first double-dip recession since the 1970s.
Vaccine roll-outs are under way and a Free Trade Agreement with the EU has been secured, putting the UK in position for a steady economic recovery from Q2 2021 onwards.
The latest forecast predicts growth of 5% in 2021, 6.5% in 2022, 2% in 2023 and 1.8% in 2024.
With a better-than-expected Q4 performance and the Office for National Statistics revising earlier GDP data upwards, the EY ITEM Club estimates that the UK economy shrank by a record 10.1% in 2020, an improvement on its December forecast of an 11.6% contraction.
Positively, the point at which the UK economy is expected to regain its pre-Covid peak is inching forward, with this now forecast to happen in Q3 2022 – an improvement on the 2023 and 2024 dates predicted in earlier forecasts.
Martin Beck, EY’s Senior Economic Adviser from ITEM Club, commented: “The prospect of a slow recovery in tourism, headwinds to the financial sector from ultra-low interest rates and threats to the Channel Islands’ tax competitiveness mean economic recovery won’t be without its challenges.
"But the financial strength of Jersey and Guernsey suggests that, while the future is hardly lacking in risks and uncertainties, the islands should be better placed than many in dealing with them.”
• To view the full report click here