When I left our offices in Richmond on the 12th March last year, little did I expect having to write these lines a year later. I obviously knew about this nasty little bug called COVID-19, and of course I knew that the next few months would be difficult for all of us but, did I expect the entire world still to be caught in a nasty web a year later? No!

Next week, we can celebrate the first, and hopefully also the last, anniversary of Annus Horribilis. At Absolute Return Partners, Rishanth joined the research team in mid-November, and I am yet to meet him in person – quite a bizarre experience. That said, I am not asking for your sympathy – not at all. Our industry actually works reasonably well without everyone showing up in the office every morning, although I must admit that I miss the daily chatter, which is part of the joy of going into the office every day. Chatting on Zoom or MS Teams is just not quite the same! The problem for society at large is that many industries are not as fortunate as the financial industry is. Going in every day is critical to the survival of many businesses.

As I started to prepare for this month’s Absolute Return Letter, suddenly, the news rolled across my screen: ”UK suffers record 9.9% slump” it said. I quickly checked if we have ever experienced a steeper GDP decline in a single year in this country, and the answer is yes – in 1709, when a bout of severe frost destroyed the harvest (Exhibit 1).

Exhibit 1: UK GDP growth (%, year-on-year)

Sources: The Independent, ONS, Bank of England

That speaks volumes about the severity of the downturn in 2020, where Q2 was particularly nasty. Towards the end of the year, things began to look better. In December, for example, the UK economy grew a modest +1.2%. That said, the New Year is not exactly off to a good start. January and February have both been dreary, following the government’s decision to lock the country down again after a Christmas where distancing rules were widely disobeyed, leading to many more deaths in the first few weeks of the New Year.

Andy Haldane, the Chief Economist (and deputy governor) of Bank of England did his very best to spin an upbeat story when, in an interview on the 10th February, he compared the British economy to a coiled spring. By June 2021, he said, British households could have built up savings of about £250Bn, much of which will likely be spent later this year as people return to the high streets.