2020 was a year full of surprises driven by the global pandemic, which rocked global financial markets triggering a series of unexpected events. 2021 is off to an interesting start as markets hit new all-time highs and many countries rollout COVID-19 vaccination programmes. Many investors and traders are optimistic about the markets, but the volatility witnessed last year is likely to persist creating excellent setups for traders. Let’s examine what is likely to happen in the UK economy.

 

UK economy Faltering after Brexit

 

The biggest difference for the United Kingdom in 2021 is that it has effectively left the European Union, and has embarked on a journey of true independence.  However, Britain’s new status as a country free from the EU’s shackles comes with its own set of challenges. The country’s economy has suffered from the impact of the pandemic lockdowns, restrictions and the new trade barriers with the EU may hinder its recovery. The British economy suffered one of the biggest declines among developed countries in 2020 and things are not looking good in 2021. The country’s economy suffered its worst recession in a century and is a long way from recovering. 

 

Although Britain managed to get a post-Brexit trade deal with the EU, British interests did not prevail within the actual trade agreement, and it was even nicknamed "no substantive agreement to leave the European Union." The country is already feeling the negative effects of the Brexit divorce and faces many unknowns given that its financial services sector was excluded from the Brexit deal. The British pound is expected to struggle this year, especially if the Bank of England embraces negative rates putting the pound on equal footing with the euro. However, the pound may benefit from the US dollar’s continued weakness as demand for it remains low is a risk-on market. The fast rollout of coronavirus vaccines in the UK combined with a quick reopening of the country’s economy may also give the pound a slight edge over its peers. 

 

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