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A recipe for recovery: The end of Brexit uncertainty, easing pandemic restrictions from spring onwards, aggressive policy support and serious catch-up potential following the massive shock of 2020 set the stage for at least two years of rapid economic growth.

Outsized gains ahead: UK real GDP collapsed by an estimated 11.5% in 2020 – a much sharper decline than in the US or the Eurozone. Looking ahead, we expect the UK to enjoy relatively fast gains over the medium term, with real GDP rising by 6.0% in 2021 and 6.5% in 2022 (Chart 1). The UK last enjoyed such strong real GDP growth over a two-year period during the “Lawson boom” of 1987-88.

Cheat sheets for 2021: In this note we assess the following 10 key issues in the UK for this year and beyond.

1) Negative rates: unlikely, not impossible

2) Housing market: rapid recovery, can it last? Yes

3) Consumption: sustained upturn as savings normalise

4) Business investment: sizeable catch up potential

5) Scottish independence: a serious risk to watch

6) Rising private debt: a manageable problem

7) International trade: mixed outlook after Brexit shock

8) Inflation: heading into a 2%+ world

9) Fiscal policy: austerity threat exceeds high debt risk

10) Labour market: partial rebound, wobble, recovery

This analysis supplements our Global outlook 2021: strong rebound ahead published on 8 January 2021 (UK overview on pages 15-16).

Kallum Pickering

Senior Economist

+44 20 3465 2672

kallum.pickering@berenberg.com

Disclosures

This material is intended as commentary on political, economic or market conditions for institutional investors or market professionals only and does not constitute a financial analysis or a research report as defined by applicable regulation. See the "Disclaimers" section of this report.

The commentary included herein was produced by Joh. Berenberg, Gossler & Co. KG (Berenberg). For sales inquiries, please contact:

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