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UK Borrowing Falls More Than Expected as Economy Rebounds

UK government borrowing is running well below levels seen at the height of the coronavirus pandemic as the economy emerges from lockdown and people shift from benefits to work.

The budget deficit stood at 24.3 billion pounds ($33.8 billion) in May compared with 43.8 billion pounds in the same month of 2020, the Office for National Statistics said Tuesday. The shortfall was below the 25.5 billion pounds median forecast in a Bloomberg survey of economists.

The figure is also below the 28.5 billion pounds predicted by the Office for Budget Responsibility. That points to a potentially faster improvement in the public finances, thanks to surprisingly buoyant economic growth and a strengthening labor market.

“As we emerge from the pandemic, we are continuing to support people and businesses to get back on their feet,” Chancellor of the Exchequer Rishi Sunak said in a statement. “We are taking to keep debt under control in the years to come.”

The budget deficit ballooned to a peacetime high of 14.3% of GDP in the last fiscal year, largely reflecting the vast cost of supporting workers and businesses through the deepest recession in 300 years. The cumulative cost of wage subsidies alone reached 65 billion pounds in May.

In March, the OBR predicted that borrowing would fall to just over 10% in the current fiscal year. Since then, however, a rapid vaccination program has seen the outlook improve dramatically. On average, economists expect growth this year of around 7%, versus the 4% predicted by the fiscal watchdog.

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The hope is that growth will bring down the deficit without Sunak having to implement the hefty tax rises he has penciled in from 2023 to pay for the pandemic.

Tax revenue rose 15%, and spending fell 12% from a year ago. Debt stood at 99.2% of GDP.

The deficit in the first two months of the fiscal year was 53.4 billion pounds, with the ONS revising down borrowing in April by 2.6 billion pounds. The shortfall was 14.1 billion pounds lower than the OBR forecast.

“More than a third of that reflects differences in the timing of EU divorce bill payments,” the watchdog said in a commentary on the latest figures. “But lower spending and moderately stronger receipts growth mean that two months into 2021-22, the underlying outperformance of borrowing relative to forecast is 8.6 billion pounds.”

By Andrew Atkinson

Source: Bloomberg

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UK economy posts record annual jump in April, up 27.6%

Britain’s economic output in April was a record 27.6% larger than 12 months before, official data showed on Friday, an increase that reflects recent reopening and the scale of disruption to everyday life early in the COVID pandemic.

The figure matched the consensus of economists polled by Reuters.

In April alone, output rose by 2.3%, marking the fastest growth since July, the Office for National Statistics (ONS) said, and compared with the Reuters poll consensus for a 2.2% increase.

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But British economic output is still 3.7% lower than in February 2020, before the pandemic led to lockdown measures.

“Today’s figures are a promising sign that our economy is beginning to recover,” finance minister Rishi Sunak said in a statement.

Last month the Bank of England raised its forecast for British economic growth in 2021 to 7.25% from February’s estimate of 5.0%.

That would be the fastest annual growth since 1941 when Britain was rearming during World War Two. But it comes after output plunged by almost 10%, the biggest drop in more than 300 years.

Source: CNBC

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UK economy accelerates as tourism and hospitality emerge from lockdown

The UK economy accelerated in May as tourism and recreation firms reopened, but the delay in ending Covid-19 restrictions is putting hospitality firms at risk, research shows.

Eleven out of 14 UK sectors reported faster growth in output month on month in May, up from nine in April, according to the Lloyds Bank UK Recovery Tracker, as the UK moved further out of lockdown.

The tracker found that the UK tourism and recreation sector recorded the sharpest rise in output growth as British hotels, pubs and restaurants benefited from pent-up consumer demand.

Firms took on more staff to handle rising demand. All 14 sectors reported jobs growth in May, led by manufacturing, while the tourism and recreation sector added jobs for the first time since January 2020.

Jeavon Lolay, the head of economics and market insight for commercial banking at Lloyds Bank, said sectors that had been acutely affected by coronavirus restrictions were now outpacing those that operated more freely during lockdown.

“Whether the four-week delay to further easing of restrictions will impact this trend is unclear. But while the delay is understandably disappointing for many businesses, there’s no denying that the economy is now on a much sounder footing,” Lolay said.

The survey also showed that companies across the economy raised their prices in May, led by chemicals and metals and mining producers.

“While UK inflation jumped higher than expected in May and stronger demand saw more businesses pass on rising costs to their customers, it’s arguably still too soon to worry about inflation spiralling out of control,” Lolay said.

The fast-food chain McDonald’s announced expansion plans on Sunday and will recruit 20,000 workers over the next 12 months as it opens 50 new restaurants in the UK and Ireland.

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But the Covid-19 restrictions are continuing to hurt the hospitality sector, particularly the night-time economy.

About 25,000 licensed premises were still shut at the end of May 2021, according to research from CGA and AlixPartners, which warned that thousands more clubs, restaurants, pubs and bars are at risk from the delay to ending lockdown.

CGA and AlixPartners found that more than three-quarters of Britain’s licensed sites were trading by the end of last month, up from about a third in April, thanks to the return of inside service.

However, while more than nine in 10 food pubs, high street pubs and casual dining restaurants are open, sectors that rely on late-night trading are still in jeopardy of failure, the report found.

“Many operators will have reopened in anticipation of restrictions falling away on 21 June, and likely forecast and accepted suppressed trade for the period up to that point,” said Graeme Smith, the managing director of AlixPartners.

“While far from ideal, knowing that ‘freedom day’ was on the horizon meant operators could battle through this challenging time, perhaps welcoming team members back to the business in anticipation and getting operations up to speed. A further delay of four weeks is a devastating blow, creating significant uncertainty and further financial strain.”

Michael Kill, the chief executive of the Night Time Industries Association, has urged the government to lift restrictions on 5 July – at the two-week review point set when the restrictions were extended. He said the industry was “on the verge of breaking”.

By Graeme Wearden

Source: The Guardian

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Reopening of UK economy to be delayed for four weeks

The full reopening of Britain’s economy has been postponed for at least four weeks due to the spread of the so-called Delta variant of Covid-19 first detected in India.

Prime Minister Boris Johnson made the announcement after the close of trading on Monday.

Restrictions on activity in pubs and nightlife venues or the rules on the use of facemasks had been due to be lifted on 21 June.

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Johnson nevertheless sounded a hopeful note, saying: “As things stand, and on the evidence that I can see right now. I’m confident that we will not need more than four weeks.”

He was speaking just after fresh figures from Public Health England revealed that the number of infections from the Delta variant had more than doubled over just the past week to 42,323.

By Alexander Bueso

Source: ShareCast

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UK unemployment rate drops in April, according to ONS

The UK unemployment rate fell in April as the economy began to reopen, according to figures released on Tuesday by the Office for National Statistics.

The unemployment rate declined to 4.7% in the three months to April, from 4.8% in March and in line with consensus expectations. Non-essential shops and outdoor hospitality reopened in April, while indoor hospitality resumed in May.

The figures showed the number of payrolled employees rose for the sixth consecutive month, up by 197,000 in May to 28.5m. However, it was still 553,000 below pre-pandemic levels.

Since February 2020, the largest declines in payrolled employment have been in the accommodation and food services sector, people aged under 25 years, and those living in London.

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ONS head of economic statistics Sam Beckett said: “The number of employees on payroll grew strongly in May, up by almost 200,000, although it is still over half a million down since the pandemic struck.

“Job vacancies continued to recover in the spring, and our early estimates suggest that by May the total had surpassed its pre-pandemic level, with strong growth in sectors such as hospitality. Meanwhile the redundancy rate remains subdued, while the number of employees on furlough has continued to decline.”

On Monday, Prime Minister Boris Johnson announced a four-week delay to the lifting of lockdown in England, which had been due to take place on 21 June. According to reports, Chancellor Rishi Sunak will not be extending furlough support despite the reopening delay.

By Michele Maatouk

Source: Sharecast

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Pandemic property repossessions on the rise

Despite record house price highs and huge levels of buyer demand, since the start of the pandemic 4,320 homes have been repossessed across England and Wales. A fifth of those have been in the North West, according to newly released data from YesHomebuyers.

With the current stamp duty holiday spurring a property market frenzy, house prices have boomed. The latest UK House Price Index shows that the North of England is leading the way, with both the North West (11.9%) and Yorkshire and Humber (10.9%) registering the highest rates of annual growth, while the North East (9%) isn’t far behind.

However, research from the homebuying platform, highlights that the North of England has seen by far the most property repossessions since the start of the pandemic, with the North West, in particular, home to the highest level.

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Property repossessions are executed by a lender, usually the bank or building society when the owner of a property fails to make the interest payments on any debt secured against their home.

Most repossessions by region

The North West has seen the highest number of repossessions during the pandemic, accounting for 20% of the total number seen across England and Wales. The North East has also seen a large number of repossessions, accounting for 16% of the national total, while Yorkshire and the Humber rank third at 14%.

Collectively, the North of England has accounted for 50% of all property repossessions seen across England and Wales during the pandemic. In contrast, the East of England has accounted for just 2% of pandemic repossessions, with the South West (6%) and East Midlands (7%) also seeing a low proportion.

The property price cost of a repossession

Traditionally, having your property repossessed would mean it selling on the open market for a far lower price. However, since the government bailed out the big lenders in the wake of the 2008 Credit Crunch, they have been under far greater pressure to prove that they have ‘Treated the Customer Fairly’ (TCF) by achieving the best price possible

Figures show that this price achieved varies across the country but on average, repossessed homes in England sell for around 77% of market value. Although they can regularly achieve as high as 95% of market value, according to founder Matthew Cooper, who previously worked managing repossessed homes for a number of lenders.

Matthew Cooper, Founder & Managing Director of Yes Homebuyers, commented: “The repossession of a home can be a very traumatic experience and although new guidelines are in place to ensure the lender achieves the highest price possible, it’s the last thing any homeowner wants to go through.

“Contrary to popular belief, home sellers in financial distress account for a very small percentage of those opting to use a quick sale platform such as Yes Homebuyers. While it does provide greater speed when transacting, as well as allowing the homeowner to maintain control of their sale, we actively advise against it if there is a more favourable option available.

“Opting for our services should really be the last resort and our advice to any homeowner is to be proactive and get your property on the market at a realistic price. Always, always communicate with the lender to let them know you’re doing everything possible and try and buy the time to get a normal sale done for the best price possible. This will put you in the best possible position to get a handle on any debt you owe, while providing the best possible foundations to move forward.”

Source: PROPERTY REPORTER

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UK economy grew by 2.3 per cent in April as high street and hospitality reopened

UK economy grew by 2.3 per cent in April as government restrictions affecting economic activity continued to ease.

It was the fastest monthly growth of gross domestic product (GDP) since July last year and exceeded economists’ forecast of a 2.2 per cent jump.

In comparison with April 2020, monthly GDP in April 2021 is estimated to have grown by 27.6 per cent.

“Today’s GDP number confirms that the UK is witnessing a strong recovery,” said Emma Mogford, fund manager of Premier Miton.

“The release of pent up demand, as consumers return to shops and restaurants, is significant. Investment by businesses is also picking up, now that there is greater certainty over the outlook post-Covid and post-Brexit.”

Service sector shines

The service sector grew by 3.4 per cent during the month, with consumer-facing services reopening as Covid restrictions eased.

Output in the production sector fell by 1.3 per cent during April, the worst fall since January as three of the four sectors contracted.

Within production, mining output dropped sharply, by 15 per cent, because of planned temporary closures for maintenance of oil field production sites.

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Meanwhile, the construction sector contracted by two per cent following a strong March, with new work slowing down faster than repair and maintenance.

“Today’s figures show that although confidence is returning to the construction sector, this remains delicate and growth in specific work sectors is mixed,” said Clive Docwra, Managing Director of McBains.

“While overall output remains just above pre-pandemic levels, driven by an increase in repair and maintenance work, new work contracts declined which bucks recent growth trends.”

Sunak: ‘Promising sign’

April’s GDP remains 3.7 per cent below the pre-pandemic levels seen in February 2020, but is now 1.2 per cent above its initial recovery peak last October.

“Today’s figures are a promising sign that UK economy is beginning to recover,” finance minister Rishi Sunak said in a statement.

Last month, the Bank of England raised its forecast for British economic growth in 2021 to 7.25 per cent from February’s estimate of five per cent.

That would be the fastest annual growth since 1941 when Britain was recovering during World War Two.

“We’ve grown accustomed to erratic GDP figures since the pandemic, but today’s data confirms that the UK reached a turning point in April, when the re-opening of non-essential retail and easing of hospitality restrictions boosted spending,” said Jonathan Sparks, chief investment officer at HSBC.

“Consumer confidence has surged higher in recent months as the reopening continues, which bodes well for more domestically-focused companies.”

By Damian Shepherd

Source: City AM

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Delay to ending lockdown would hit UK economic recovery

A delay to the planned lifting of lockdown on June 21 would “materially” hamper UK economic recovery from the pandemic, a major business group has warned.

The British Chambers of Commerce (BCC) said the economy is in a “temporary sweet spot”, but there would be a big threat to the outlook from any Government move to push back the lockdown road map, as well as from rising inflation.

It cautioned this could derail the current rebound, which the BCC predicts will see the UK economy grow by 6.8% this year – the strongest since official records began.

The biggest spending surge since 1988 is set to help the UK economy recover from a 1.5% contraction in the first quarter to grow by 4.1% between April and June as lockdown restrictions lift, according to the group.

Pent-up demand from Britons with savings built up in lockdown is set to see the economy continue growing by 3.5% in the third quarter, before easing back to 1.1% in the final three months.

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The squeeze on activity and the damage to confidence from a marked delay to the full lifting of restrictions or further restrictions to combat Covid variants would materially slow the recovery

Suren Thiru, BCC head of economics

The BCC said this will be largely driven by a 5.5% rise in consumer spending in 2021 – the strongest for 33 years – while business investment will surge by 4.1%.

But it warned over the risks from inflation and ongoing restrictions.

The economic rebound will also be uneven across sectors and for different people, with the BCC adding that trade will suffer from post-Brexit disruption.

Suren Thiru, head of economics at the BCC, said: “The risks to the outlook are on the downside.

“A more significant surge in inflation would weigh on a consumer-led revival by eroding their spending power.

“The squeeze on activity and the damage to confidence from a marked delay to the full lifting of restrictions or further restrictions to combat Covid variants would materially slow the recovery.”

The BCC forecasts inflation – currently at 1.5% – will jump to a three-year high of 2.6% in the third quarter of 2021, but should ease back to the 2% target in the second quarter of next year.

The BCC also raised worries over youth unemployment, with job prospects for young people set to suffer the most from the pandemic.

While it forecasts the wider rate of unemployment to peak at 6% in 2021 thanks to furlough support, the BCC expects the youth unemployment rate to soar to 15.6% once the scheme ends.

Hannah Essex, co-executive director of the BCC, said: “Young people now entering the workforce and those who lost jobs during the pandemic are at particular risk of longer-term unemployment.

“As the economy emerges from the pandemic, we need to create a dynamic and flexible skills system that meets the needs of local employers and supports individuals looking to return to the jobs market.”

Source: iTV

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Second charge mortgage market ‘returns to growth’ in April

The second charge mortgage market experienced growth of 176% in April, according to the latest data from the Finance & Leasing Association (FLA).

Figures out today show the value of new business in this part of the mortgage market grew by 154% compared to the same month last year.

Fiona Hoyle, director of consumer & mortgage finance and inclusion at the Finance & Leasing Association (FLA), said: “The second charge mortgage market returned to growth in April in line with expectations given the adverse impact of the first lockdown on new business levels in the second quarter of 2020.

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“The market is expected to record a strong recovery in new business levels during the second half of 2021.”

Today’s data revealed there were 1,890 new agreements in April which represented a 176% increase compared to the same month in 2020.

The value of new business, meanwhile, was £81 million in April 2021 which was 154% up on the previous year.

During the peak of the lockdown, in April 2020, the value of new business had plunged by 43%. So today’s figures demonstrated the strong recovery which has taken place in the second charge market.

By Kate Saines

Source: Mortgage Finance Gazette

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Small business confidence rises but lockdown fears remain

Small businesses in the UK are increasingly confident they can grow and drive economic recovery, though many still harbour fears about the ongoing impact of Covid restrictions.

This is according to new data published by the British Chambers of Commerce in partnership with Funding Circle, the UK’s largest small business loan platform.

The survey of more than 1,000 firms, almost all SMEs, reveals the majority (63%) are emerging from lockdown with either concrete plans or intentions to grow their business over the next 12 months. The manufacturing sector (68%) is particularly optimistic, while nearly six-in-ten (58%) of the hardest hit business-to-consumer (B2C) firms such as hospitality, catering and retail still anticipate growth.

Although the UK economy is yet to fully reopen, many businesses have demonstrated their resilience and are already carrying out their vital role as engines of economic growth.

More than half (53%) said they had restarted or returned to pre-pandemic levels in April, with a further 27% expecting to reach this milestone by October. By the end of the year, 91% of businesses expect to have fully restarted, with only 1% not expecting to restart for the foreseeable future.

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For many, the biggest barriers to reopening are Covid-related, such as the risk of further lockdowns (cited by 38% of respondents) or social distancing requirements (cited by 37%). Concerns around reduced customer demand (33%), inflation pressure (18%) and recruitment difficulties (14%) are also weighing on UK businesses.

Access to finance will be key in helping SMEs to unlock their full growth potential, with nearly half (44%) believing it will help overcome the remaining barriers they face.

Commenting on the findings, Claire Walker, Co-executive Director of the BCC, said: “The ability of businesses to bounce back from the devastation caused by Covid is a huge testament to their resilience. Although, the financial support put in place by the government to help many through the last 12 months will have played a crucial role.

“The government must now clarify the future of safety measures, such as social distancing, and set out a clear package of support that would be available should further restrictions be imposed on businesses this year, or in the years to come.

“Firms will feel more confident and will be more willing to invest in jobs and in developing their business, if government can give assurances that a safety net of financial support will be provided should there be a need for restrictions which reduce or stop commercial activity in order to protect public health.

“There is cautious optimism growing among firms that as the economy now gradually unlocks, they will be able to push on and return to growth. But the shadow of Covid is very long; many firms still feel uncertain about what the future holds. Having access to finance to help them weather this continuing uncertainty may well prove vital.”

Lisa Jacobs, Europe Managing Director at Funding Circle, added: “While the road to recovery won’t be straightforward, it is great to see SMEs are looking towards the future with such optimism. From our conversations with customers, it’s clear their appetite to invest in their businesses is as high as ever. We’re ready to continue helping them access the finance they need to overcome the remaining hurdles they face and achieve their growth ambitions.”

Source: Punchline

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