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26 Spring 2021 O n rst inspection, the British government appears to have scored a success, achieving its desired “thin” deal that releases it from regulatory alignment with the EU. The price is the greatest imposition of red tape and trade barriers in memory. The deal also leaves many areas unresolved, the largest being the critical services sector which makes up 80% of economic output. During the rst few weeks of January there were some issues with cross-border trade in food, especially in Northern Ireland. Time will tell whether these are merely teething The Christmas Eve agreement sealed a deal with the EU that avoided the disastrous cli -edge of a no-deal Brexit. UK’S THIRD NATIONWIDE LOCKDOWN AND THIN BREXIT DEAL AGREED SPRING 2021 In association with HAE problems or more severe issues arise over the course of 2021. Rather than getting Brexit done, what we are likely to end up with is a continuous re-evaluation of agreements with the EU, with future standards in the hands of trade committees unaccountable to parliament and the electorate. Meanwhile the UK is in a third nationwide lockdown, thanks to the new, more infectious virus strain combined with the allowing of household mixing over Christmas, with record numbers of hospitalisations and fatalities at the current time. While this lockdown is less restrictive than the rst, the impact to economic activity will still be signi cant. With vaccinations now taking place, there are hopes of lifting restrictions in the summer. Everything is now riding on the e ectiveness of the vaccine and the level of immunity that arises. More than ever, we need long-term planning as we will have to live with this virus for the foreseeable future. It is critical that the vulnerable are protected and we can maintain the virus at minimal levels that ensure the functioning of society and the economy. ECONOMIC ACTIVITY GDP in November fell by 2.6% as the second nationwide lockdown inhibited activity. This was less than experts’ predictions of 5-6%. We expect the economy to end 2020 7.5% below where it nished in 2019. At the sector level, as expected the services sector took the largest hit in November, falling by 3.4%. The sector is now 10% smaller than it was in February. Positively in-month production activity was broadly unchanged. The construction sector grew by 1.9% and is now 0.6% above February’s level. EXPECTATIONS FOR 2021 Over 2021 we expect the recovery to remain protracted owing to the deteriorating macroeconomic situation, however there is more upside thanks to the rollout of vaccines. The recovery