Companies may find they face serious challenges in 2021 as the UK economy suffers the twin impacts of Brexit and the ongoing Coronavirus pandemic, a new report has warned.

The National Institute for Economic and Social Research (NIESR) has delivered a negative verdict on the prospects for the economy, with its forecast for economic growth downgraded from 5.9 per cent to 3.4 per cent.

With the UK economy having contracted 9.9 per cent in 2020, this means Britain’s economy will still be significantly smaller at the start of 2022 than it was when the pandemic began.

If such a downbeat prognosis turns out to be accurate, firms may find they need to make use of business finance consulting services in order to find the best ways to survive and chart a way forward through the slow recovery.

Discussing the impact of Brexit, the report said that a number of “gaps” exist in the trade agreement between the EU and UK that “require implementing mitigation policies and structural reforms over several years,” while new trade deals will be needed with other countries.

The report also said that while the vaccination programme posed a potential ‘upside’ factor that could increase optimism about a forthcoming re-opening of the economy as social distancing measures ease, the danger posed by new vaccine-dodging variants constituted a corresponding ‘downside’ risk as these could lead to restrictions remaining in place.

In addition, the report warned that the UK could also be hit by a generally slow global economic recovery as the world gradually eases its way out of the pandemic.

Not every economic prediction is as downbeat as that of the NIESR, however; the Bank of England’s Monetary Policy Committee gave a more positive verdict in the minutes outlining its February policy decision to leave interest rates unchanged.

It said the economy is set to “recover rapidly towards pre-Covid levels over 2021” as the vaccine rollout helps open the economy up.