The third COVID-19 wave is further delaying the Western Europe outlook for recovery. Economic growth will only modestly improve in 2021, hovering at 3.6% year-over-year after a drop of 7.9% in 2020. Market conditions should pick up only in the latter half of 2021, in the absence of lockdown restrictions and after expected progress in vaccinations in April/May. Northern WEUR countries, especially Germany, the Netherlands, and the UK, are positioned to recover at a faster pace thanks to high manufacturing output and a strong direct fiscal stimulus. 

Economic recovery is losing steam in the first half of the year but will revive more solidly in the second half of 2021. The resurgence of the pandemic in the fall and winter dashed prior expectations for a fast recovery. Amid elevated cases in winter, tight restrictions are a certainty until June 2021. On a positive note, progress in vaccinations in April/May will pave the way for gradual relaxation of restrictions by the end of the second half of 2021. Therefore, the summer rebound will be underpinned by higher mobility levels, declining COVID-19 deaths, as well as consistent growth in manufacturing and exports, propelled by strong demand for consumer goods. 

Consumers will not fully return to their pre-COVID habits in 2021. Consumers will only gradually feel more confident about re-engaging in their pre-COVID-19 activities due to social distancing measures and fear of COVID-19 infection. As a result, international tourism flows will not return to pre-pandemic levels before 2023–2024, restraining turnover of the accommodation and food service sectors. The remote working trend will be the new normal throughout at least 2021. Governments will play an instrumental role in supporting private consumption until key restrictions are lifted and fiscal measures distinctly determine the pace of recovery. 

Geographical and sectoral segmentation will be key for optimal planning. The recovery has been W-shaped so far, but the WEUR economy will strengthen consistently quarter-by-quarter after the first half of 2021, as vaccinations accelerate. Northern Europe presents stronger opportunities in the recovery, thanks to little dependency on tourism and healthy public finances. On the flip side, Southern Europe will suffer for longer due to tourism reliance, matched with fiscal constraints. The pharma and chemical sectors will continue to offer strong returns throughout 2021, whereas heavy machinery and capital goods’ performance will lag. Online retail will remain the key sales path throughout 2021. 

Actions for Business Professionals 

  • Closely engage with distributors, partners, and dealers to understand the operational and demand problems they face during the pandemic. 
  • Prioritize serving verticals that will recover faster, such as IT and telecoms, financial services, food, beverage & tobacco, pharma manufacturing, and repair and installation of machinery. 
  • Target resilient customer segments (e.g., consumers within higher-income brackets, public sector workers, and people in retirement), who are less affected by the crisis. 

Download an executive summary of our 2021 Western Europe Outlook for a full breakdown of the global drivers of the region in 2021 and how they impact your business: 

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