Anne Marie Waters
Tuesday 11th May 2021
It’s been a while since my last look at the state of the economy, and at first glance, it seems to be looking positive – at least somewhat.
The BBC reports that the UK economy is set to grow at the fastest rate for 70 years as COVID restrictions begin to lift later in the month. May 17th will see indoor leisure facilities re-open and life is due to return to ‘normal’ on June 21st.
On the less positive side however, the governor of the Bank of England Andrew Bailey has described a ‘bounce back’ rather than a boom, and the predicted growth of 7.25% is set against the contraction of 9.9% in 2020. Bailey said “We’re going to see a continued strong recovery this year, but let’s put that into perspective. That’s two years passed with no growth in the economy.”
A combination of businesses reopening and the vaccine rollout (which will inspire consumer confidence and bring shoppers back to the high street) will primarily cause the growth. It is also predicted that unemployment will be l0wer than initially anticipated. Chancellor Rishi Sunak has extended the government’s furlough scheme to September as a way of bridging the gap between the economy reopening and ending the government subsidy of wages. Unemployment was predicted to be 8%, but this has now been altered to 5.5%. This amounts to 700,000 predicted job losses which won’t now be lost.
There has been one other very interesting development in the lockdown – households have saved around £150 billion. Such savings have been the result of loss of leisure and lack of costs for travelling to and from work. But it is estimated that only around 10% of this will spent in the coming year because there is still so much uncertainty and people are not even at the level of cautiously optimistic just yet.
Other noteworthy points include a probable lack of wage increases as businesses remain cautious, and interest rates which remain at a tiny 0.1%.
In terms of how businesses are doing, reports reveal that supermarkets are heading the field. Morrison’s for example says that the pandemic has led to a “renaissance of the supermarket”. This is understandable given that they were pretty much the only businesses allowed to stay open! Its sales are up 2.7% in the last few weeks.
Similarly, the bakery giant Greggs is reporting a surge in sales and predicts a strong recovery. Pret a Manger is planning new sales strategies and will soon be moving in to Tesco stores in a bid to grab the work-from-home market. Businesses such as Pret have seen a huge downfall given the closure of offices and drastic reduction in the lunchtime market.
The airline and tourist industry remain among the hardest hit. British Airways has asked the government for “travel corridors without restrictions” and the sooner the better. The International Airlines Group (IAG) has reported massive losses since the start of the pandemic. Revenue for the first three months of this year was 968 million euros, compared to 4.6 billion euros for the same period last year.
All in all, there are reasons for optimism for the immediate economic future. But the sting in the tail is enormous levels of public debt, uncertainty, and the ever-looming threat of future variants of coronavirus.
Anne Marie Waters
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