Economic Perspectives –

Another lockdown and more Government support

The latest Perspective from Ruth Lea CBE, Economic Adviser to Arbuthnot Banking Group.


11th January 2021


Ruth Lea CBE


In this Perspective Ruth Lea, Economic Adviser to the Arbuthnot Banking Group, discusses the latest UK policy developments:

  • The Prime Minister announced a new lockdown (England) last week, which took effect on 6 January. He implied the new lockdown restrictions would last until mid-February (at the least), but note the regulations allow the lockdown to remain in place until end-March.
  • Given the new restrictions on economic activity, GDP can be expected to fall in 2021Q1 (possibly by 3%) after a weak 2020Q4 (possibly down on 2020Q3 by around ¼-½ %).
  • The Chancellor announced a new £4.6bn support package for retail, hospitality and leisure businesses on 5 January, which led to speculation that the OBR’s November government borrowing forecasts for FY2020 and FY2021 (£394bn and £164bn respectively) could be significantly overshot. New forecasts will be available for the 3 March Budget. 

Concerning economic indicators:

  • Markit surveys were firmer, on the whole, in December, reflecting some lifting of restrictions. Growth firmed in manufacturing and was little changed in construction, whilst the services output decline eased. 
  • The Society of Motor Manufacturers and Traders (SMMT) reported that car registrations fell 29.4% (YOY) in the year 2020, to 1.63 million in “the toughest year for market since 1992”.
  • Bank data showed net mortgage borrowing by households strengthened to £5.7bn in November, whilst the number of approvals for house purchase increased further in November, to 105,000, the highest number since August 2007. The Halifax reported house prices rose 6.0% (YOY) in December, after November’s 7.6%. Prices were at record highs, though the pace of growth had slowed.
  • Bank data showed households’ net consumer borrowing remained weak in November, with households making net repayments of £1.5bn.

US political update:

  • The House of Representatives and the Senate certified the final Electoral College vote on 7 January, with Democrat Joe Biden receiving 306 votes and Republican Donald Trump receiving 232 votes. Joe Biden’s presidential inauguration is on 20 January 2021.
  • Democrat candidates won both Senate seats for Georgia in the run-off elections on 5 January, giving the Democrats and allies 50 seats and the Republicans 50 seats. New Vice-President Kamala Harris will have any tie-breaking votes in the Senate, effectively giving the Democrats a marginal majority (51/50). The Democrats also have a majority of seats in the House.
  • There are strong expectations that Joe Biden’s government will significantly raise government spending, and the government deficit.

Brexit update:

  • UK-EU negotiations began last week, which aim to draw up a Memorandum of Understanding (MoU) on future cooperation in financial services by March 2021.
  • The Department of International Trade (DIT) has completed, or is in the process of completing, a very significant number of trade deals with non-EU countries, which seek to reproduce the effects of trading agreements that applied to the UK when it was a member of the EU’s Customs Union.


Ruth Lea said “There is little doubt that the latest lockdown will hit parts of the economy hard, including the beleaguered retail, hospitality and leisure businesses. The Chancellor’s latest package (£4.6bn), whilst welcomed by business, was nevertheless criticised as insufficient to adequately support the sector. Under these circumstances, it is reasonable to expect further Government measures, which will inevitably put further pressure on the Government finances.”





Economic Perspectives

Would you like to receive Arbuthnot Latham’s fortnightly Economic Perspectives from Ruth Lea CBE directly to your email inbox? Click the button to subscribe to our email newsletters.

Subscribe to our newsletters

Author -

Ruth Lea CBE

Ruth Lea CBE

Economic Adviser, Arbuthnot Banking Group

Ruth Lea CBE has been Arbuthnot Banking Group’s Economic Adviser since 2007 and was an Independent Non-Executive Director from 2005-2016.

Ruth co-founded Global Vision in 2007 and was Director until 2010, and was previously the Director of the Centre for Policy Studies (from 2004 to 2007), Head of the Policy Unit at the Institute of Directors (from 1995 to 2003) and Economics Editor at ITN (from 1994 to 1995).  Prior to ITN she was Chief UK Economist at Lehman Brothers, Chief Economist at Mitsubishi Bank, worked for 16 years in the Civil Service (the Treasury, the DTI, the Civil Service College and the Central Statistical Office) and was an economics lecturer at Thames Polytechnic (now the University of Greenwich).

She is the author of many papers and articles on economic issues and has been a Governor of the London School of Economics and Council Member of the University of London.

Tel: 020 8346 3482
Mobile: 07800 608 674