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UK economy will be back to its pre-COVID-19 level around the middle of next year

UK economy will be back to its pre-COVID-19 level around the middle of next year, according to economists in a Reuters poll who said unemployment would peak at 6.2% as 2021 draws to a close and the pandemic job support scheme ends.

The UK has suffered the highest coronavirus-related death toll in Europe. But a swift vaccine rollout and plummeting infections has allowed the government to begin easing restrictions and on Monday non-essential retail and outside hospitality reopened.

Last year the economy shrank by the most in more than three centuries, but the April 7-12 poll of around 70 economists said it would expand 5.0% this year and 5.5% in 2022. In a March poll those forecasts were 4.6% and 5.7%, respectively.

With much of the country’s dominant service industry closed, and citizens encouraged to stay at home, the poll suggested the economy contracted 2.3% last quarter. Now that lockdowns are being loosened, it was expected to grow 3.5% this quarter and 3.0% next.

“There are mounting signs that the effects on the UK economy from the third COVID-19 lockdown have started to thaw,” said Paul Dales at Capital Economics.

“We are sticking to our relatively optimistic view that the reopening of the economy and the vaccine programme will allow GDP to regain its pre-pandemic level early next year.”

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But asked when the British economy would be back to its pre-pandemic size the majority of respondents to an additional question thought it would take a bit longer, with 10 expecting it to be a quarter or two later.

Finance Minister Rishi Sunak said last month he expected the UK economy would return to its pre-pandemic size in mid-2022. Six respondents in the poll said it would take longer and five said it would be sooner.

FINAL FURLONG

Britain’s job market has been protected by a huge government furlough scheme which is due to run until end-September, keeping unemployment levels relatively low. It was 5.0% in the three months to January.

The median response to a question asking where it would peak was 6.2%, most likely towards the end of this year when the furlough scheme finishes.

“Some rise in unemployment is probable once furlough ends. But the evidence from around the world is that labour markets can recover quickly and if scarring is contained, jobs growth can recover through 2022,” said Brian Martin at ANZ.

Like many of its global counterparts, during the height of the pandemic the Bank of England slashed borrowing costs to a record low and restarted its asset purchase programme to try and support the economy.

None of the 60 economists polled expected Bank Rate to move from 0.1% when the Monetary Policy Committee meets on May 6 and medians in the survey suggest it won’t increase until 2023. The earliest anyone had a hike pencilled in was for Q3 next year.

Inflation has held well below the Bank’s 2.0% target, allowing it to remain accommodative with policy.

The poll showed inflation would not reach that goal until towards the end of this year although an overwhelming majority of respondents to an additional question, 15 of 17, said the risks to their forecasts were skewed more to the upside.

“Higher inflationary pressures are still evident – with shipping costs, input costs indices and commodity prices still up,” said James Pomeroy at HSBC.

Reporting by Jonathan Cable

Source: UK Reuters

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UK economy ended 2020 better than previously expected

The pandemic-hit UK economy grew quicker than earlier expected in the final three months of 2020, but still shrank by the most in more than three centuries that year, according to official data, which revealed the biggest pile of household savings on record last year. The Bank of England thinks this will fuel a recovery when consumers are freed from lockdown.

Gross domestic product (GDP) increased by 1.3 per cent between October and December from the previous three-month period, UK media reported citing the Office for National Statistics (ONS).

In 2020, GDP fell by 9.8 per cent from 2019, only slightly less sharp than an initial estimate of a 9.9 per cent slump.

The UK economy suffered the biggest drop of all countries in the Organisation for Economic Cooperation and Development (OECD) except for Argentina and Spain last year, OECD data has shown.

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It remained 7.3 per cent smaller than before the pandemic, in inflation-adjusted terms, the second biggest drop among eight major economies listed by the ONS.

Although this partly reflects the way different countries produce the data, some of the weakness shown by Britain’s economy, particularly in household spending, was real.

After a rollercoaster 2020, when GDP careened 19.5 per cent lower in the second quarter, during the first lockdown, and grew by almost 17 per cent in the third, the Bank of England expects growth of 5 per cent in 2021 as a whole, helped by Europe’s fastest vaccination programme.

The savings ratio rose to 16.1 per cent from 14.3 per cent in the third quarter and for 2020 as a whole it hit a record high of 16.3 per cent, compared with 6.8 per cent in 2019, the ONS said.

Source: Fibre2Fashion

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UK economy set for a significant boost, new figures show

The UK economy is set for a significant boost as UK mid-sized businesses emerge from a winter of lockdowns and restrictions with plans to invest and recruit, according to new figures published today.

According to the data from accountancy and advisory firm, BDO, medium-sized businesses are set to spearhead the UK’s economic recovery with three quarters (75%) of mid-tier businesses stating that 2021 is the time to invest, and over a quarter (26%) already planning to invest in new locations or M&A.

BDO surveyed leaders from 500 medium-sized businesses across the UK to uncover their plans for the year as the UK progresses with its rapid vaccine rollout programme.

Hinting at some early signs of recovery, 86% of UK mid-tier businesses are looking to recruit more staff over the next six months, with over half (54%) planning permanent appointments. Almost three quarters of businesses based in Yorkshire and the Humber, as well as Central South (73%), will add permanent staff to their ranks.

The Government’s £3,000 apprenticeship grant also provided a boost, with over a third (36%) of businesses stating they would now hire apprentices as a direct result of this incentive. This came as part of a larger 70% of businesses planning to recruit in this area regardless of the incentive.

News of investment in apprenticeships will be welcomed by many, with recent data from the ONS revealing that those under the age of 25 account for more than two thirds of job losses since the start of the pandemic.

Businesses believe they are well supported by the Government for the year ahead. 73% agreed the Chancellor promised enough to support the regional “levelling up” agenda in his March budget, while 59% believe that their region will be given enough financial support over the next 12 months as a direct result of the pandemic.

Investment plans also received a boost in the March budget. Nearly half of businesses (47%) are planning new investments following the “super deduction” initiative, which allows companies to cut their tax bill by up to 25p for every £1 they invest.

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There is cause for further optimism as three quarters of businesses (75%) expect revenues to return to pre-pandemic levels within a year of the strictest restrictions being lifted.

That said, few businesses have come away from the crisis unscathed. Over a third (38%) of businesses stated that their business model or product line will change in light of the pandemic. Another third (33%) expect pricing of products and services to increase, likely reflecting a need to pay back debt or recover higher costs.

Reflecting on the findings Ed Dwan, Partner at BDO, commented: “Mid-sized businesses are the engine of the economy; they have often proven robust even during the most uncertain economic conditions. The resilience they have demonstrated over the past year will mean they are well-placed to benefit from the vaccine roll-out and gradual lifting of restrictions. Ultimately these businesses will drive the UK’s economic recovery forward.

“However, the strength of the mid-market economy can’t be taken for granted. The results show that Government support has been vital for this segment of the UK economy so far, but areas such as access to finance and support on supply chain disruption will be crucial in creating an environment that allows these businesses to thrive.”

Mid-sized, PE owned and AIM listed businesses, what BDO calls the economic engine, account for less than 1% of businesses overall but contribute £1.4tn in revenues and provide one in four jobs. In the five years leading up to the start of the pandemic, these businesses grew revenues by 46% despite Brexit-related uncertainty.

The role of the economic engine in the UK’s wider economic recovery should not be overlooked. In 2015, the CBI estimated that the growth of just 3,000 mid-sized firms from 2010 to 2013 was enough to drag the country out of recession and into growth after the financial crash. If more firms had rebounded quickly and hit pre-recession growth rates, then it could have added tens of billions of pounds to the UK economy.

By: Barney Cotton

Source: Business Leader

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UK economy boom: Britain ‘will recover quicker than the eurozone’

THE UK ECONOMY will recover quicker than the eurozone does following the coronavirus pandemic, an economist tells Express.co.uk.

The biggest economies in Europe were brought to a stand still last year, and intermittent lockdown measures have taken their toll. But as the vaccine rollout in the UK accelerates, Bank of England Governor Andrew Bailey said recently that there is “light at the end of the tunnel”. The EU’s rollout has been hit with delay, and Chief Economist at Resolution Foundation, Jack Leslie, tells Express.co.uk that the UK economy is set to enjoy a quicker recovery than the eurozone. He said that this recovery will be sharper because of the successful distribution of jabs, but also because the UK economy endured a deeper recession initially.

Mr Leslie said: “I think the starting point is that the UK economy has fared worse over the past year than most of Europe. Countries like Spain Italy and France have also fared pretty badly.

“Most in Europe have had a better crisis, so there’s more scope for the UK to have strong growth in 2021 than Europe, so I would absolutely expect the UK to have stronger growth this year.

“The faster vaccine rollout will be a big deal, it has been a major success and will enable the UK to recover faster as well, but I think ultimately what a lot of the recovery is going to need is globally everyone getting back on their feet, it will be positive for the UK if Europe also has a strong recovery.”

The UK economy suffered a record annual slump in 2020, shrinking by 9.9 percent last year as coronavirus restrictions hit output.

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The contraction in 2020 “was more than twice as much as the previous largest annual fall on record”, the Office for National Statistics (ONS) said.

Britain’s annual economic decline was the worst in the G7.

GDP fell by 3.5 percent in the US, by five percent in Germany, 8.3 percent in France and 8.9 percent in Italy.

The Canadian economy is forecast to have shrunk by five percent, and Japan’s by about 5.6 percent.

However, the UK fared better than Spain, where the economy collapsed by 11 percent last year.

Britain also managed to avoid a double-dip recession, something Europe looks set to endure.

Marcel Klok, senior economist at ING, said last month: “With lockdowns extended into the new year, it really feels like it is darkest before dawn in the euro zone. In the first quarter, GDP is all but certain to contract again and the question is now by how much.

“The combination of lockdowns and vaccinations will allow for more substantial reopening of economies over the course of the second quarter. This will then also mark the start of the recovery of the euro zone economy.”

The UK and EU have also clashed again over vaccines after European Council President Charles Michel accused the UK of blocking the export of coronavirus vaccines.

Foreign Secretary Dominic Raab sent a letter to Mr Michel on Tuesday night dismissing suggestions Britain had banned exports of the life saving doses.

He said: “I wanted to set the record straight. The Government has not blocked the export of a single COVID-19 vaccine or vaccine components.

“Any references to a UK export ban or any restrictions on vaccines are completely false.”

Mr Michel had said that Britain and the US “imposed an outright ban on the export of vaccines or vaccine components produced on their territory”.

By CHARLIE BRADLEY

Source: Express

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UK economy to return to pre-Covid levels by middle of 2022

The UK economy is forecast to return to pre-Covid levels by the middle of 2022, with growth of 7.3% next year, according to UK chancellor Rishi Sunak.

The chancellor also forecast an economic rebound this year, with predicted annual growth of 4%.

But the stark impact of the impact of the pandemic includes a 10% shrinking of the UK economy in 2020 and 700,000 job losses since the start of the pandemic – with unemployment set to peak at 6.5% in 2022.

The government’s Furlough scheme is being extended to the end of September, with employers being asked to contribute 10% in July and 20% in August and September.

The Builders Merchant Federation (BMF) said the Budget “largely struck the right notes in continued support for business”.

John Newcomb, CEO of the Builders Merchants Federation, praised the chancellor for supporting small businesses via the Furlough scheme and business rate discounts.

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“Similar extensions to self-employment grants will help small builders and other trades who form the main merchant customer base and ensure they are still in business to service the needs of homeowners helped by the new government-backed mortgage guarantee scheme and the extension of the Stamp Duty Holiday,” he said.

He also welcomed the announcement of a new UK Infrastructure Bank as a sign of the chancellor looking to the construction industry to help drive economic recovery.

The Bank in Leeds will have £12bn in capital, with the aim of funding £40bn worth of public and private projects.

Mr Newcomb did however express disappointment at the lack of a National Retrofit Strategy.

“This would not only upgrade the country’s housing stock to the highest levels of energy efficiency, but would also provide a platform to upskill the building trade with skills required both to retrofit existing homes and build low carbon new homes, helping to achieve the Government’s Net Zero ambition.”

Other points in the Budget include:

• Stamp duty holiday on house purchases in England and Northern Ireland being extended to June 30

• Tax breaks for firms to “unlock” £20bn worth of business investment

• £5bn in restart grants for shops and other businesses in England forced to close

• Business rates holiday for firms in England to continue until June with 75% discount after that

• Corporation tax on company profits above £250,000 to rise from 19% to 25% in April 2023

Source: TTJ

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UK economy at risk of double-dip after bouncing back strongly over the summer

UK economy bounced back strongly over the summer but fears are mounting that the recovery is running out of steam.

Retail sales climbed by another 1.5 per cent in September – taking gains in the third quarter of the year to a record 17.4 per cent.

Sales are now 5.5 per cent higher than they were in February before the full force of the pandemic struck, according to the Office for National Statistics report.

With household spending seemingly powering the recovery following the lockdown, the Ernst & Young Item Club estimated that the economy grew 16 per cent in the third quarter.

That follows a record contraction of almost 20 per cent in the second quarter. But it is feared that the recovery is faltering as fresh restrictions to prevent a second wave of the virus take their toll.

A separate report by IHS Markit showed the economy has lost momentum. Its purchasing managers’ index (PMI) – a key gauge of the private sector where scores above 50 show growth – fell from 56.5 in September to a four-month low of 52.9 this month.

‘The pace of UK economic growth slowed in October to the weakest since the recovery from the national Covid-19 lockdown began,’ said IHS Markit economist Chris Williamson.

‘Not surprisingly, the weakening is most pronounced in the hospitality and transport sectors, as firms reported falling demand due to renewed lockdown measures and customers being deterred by worries over rising case numbers.’

Warning that the fourth quarter of the year has started on ‘a weakened footing’, he added: ‘The risk of a renewed downturn has risen.’

Paul Dales, chief UK economist at Capital Economics, said Britain was at risk of a double-dip recession.

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He said the slowdown this month ‘comes before the full force of the latest Covid-19 restrictions are felt and supports our view that GDP will stagnate in the final three months of the year, if not contract again.’

He added: ‘The PMIs suggest you shouldn’t read too much into the decent rise in retail sales in September.

‘Instead, the renewed downward trend in the PMIs provides a better sense of what’s happening to the overall economy. And it’s not looking good.’

The UK economy contracted by 2.5 per cent in the first quarter of the year and by a record 19.8 per cent in the second quarter as the closure of businesses wreaked havoc.

While the economy bounced back over the summer, it is feared that strict restrictions will derail the recovery.

Sam Miley, an economist at the Centre for Economics and Business Research, said: ‘Some fragility is likely to arise in the coming months.

‘This stems from the increasingly widespread reimplementation of restriction measures across the country, with this set to impact consumer behaviour.’

By HUGO DUNCAN FOR THE DAILY MAIL

Source: This is Money

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