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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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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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UK economy set to grow 7.2 per cent this year

The UK economy is set to grow at its fastest rate since the second world war this year and in 2022, the Organisation for Economic Co-operation and Development (OECD) has forecast.

After the Covid-19 ravaged economies, the UK suffered a 9.8 per cent contraction in 2020 – its worst in nearly 300 years.

The organisation anticipates a GDP growth of 7.2 per cent this year and 5.5 per cent in 2022.

The OECD has warned that global recovery is now at a “critical stage” and unequal vaccine distribution could swell global economic disparities.

The collision of Brexit and the pandemic may also hinder the UK more than other G7 nations – while the UK’s losses will likely far surpass that of Japan, Canada and the US, according to OECD.

“Declines in potential output growth in major euro area members could be 0.3 percentage point per annum on average over 2019-22,” it said.

“The United Kingdom could suffer the biggest reduction amongst G7 countries (a decline of 0.5 percentage point per annum), in part reflecting the additional adverse supply-side effects from 2021 following Brexit.”

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A “rebound of consumption, notably of services” has stoked positive growth and GDP is anticipated to return to pre-pandemic levels in the early months of next year.

“Keeping up the pace of vaccinations and responding to emerging virus mutations are key challenges going forward,” the OECD added.

Global GDP growth has been estimated to be around 5.8 per cent this year.

“The strength of the UK’s growth forecast is testament to the ongoing success of our vaccine rollout and evidence that our Plan for Jobs is working,” chancellor, Rishi Sunak, said in response to the OECD’s outlook.

“It is great to see some early signs that the UK economy is bouncing back from the pandemic, but with debt at nearly 100 per cent of GDP, we must also ensure public finances remain on a sure footing.

“That’s why at the budget in March I set out steps we will take to bring debt under control over the medium term; ensuring our future recovery is sustainable.”

By Millie Turner

Source: City AM

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Service sector optimism grows at fastest rate on record

Optimism over the future of the service sector increased at the fastest pace on record in the three months to May as the UK’s economic recovery from the pandemic gathered steam.

According to the CBI’s latest quarterly Service Sector Survey, sentiment about the general outlook for the professional services sub-sector jumped from +23 per cent to +63 per cent, a record leap.

Meanwhile, buoyed by the reopening of non-essential retail and hospitality, the consumer services sector saw optimism jump from -55 per cent to +33 per cent.

The picture was more mixed for volumes, with business and professional services volumes rising at the fastest rate on record last quarter, while consumer services volumes continued to decline but at a much slower pace.

But both sub-sectors expect strong growth in volumes in the quarter ahead.

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The CBI’s data comes after IHS Markit’s flash PMI reading for May suggested that business activity in the UK expanded at its fastest rate since 1998 this month.

Driven by the government’s rapid progress with the vaccination scheme, ministers have been able to peel back restriction layer by layer, allowing business activity to take off.

The service sector is at the core of the UK’s economy, accounting for 81 per cent of total UK economic output in 2020.

Ben Jones, CBI Principal Economist, said: “With the reopening roadmap on track and the vaccine rollout delivering, it’s no surprise to see an uptick in optimism across the sector.

“Both sub-sectors are expecting strong business growth over the next few months as restrictions continue to lift.”

But, he added, “clarity on future social distancing requirements and workplace testing would go further towards smoothing the route to recovery.”

By Edward Thicknesse

Source: City AM

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UK economic growth is picking up pace as restrictions ease

HOPES have been raised that UK economic growth is picking up pace in the second quarter after a key survey signalled a big leap in private sector activity in May, driven by a resurgence in manufacturing and the reopening of retail and hospitality.

The seasonally adjusted, flash composite purchasing managers index (PMI) for the services and manufacturing sectors reached a series high of 62.0 in May, up from 60.7 in April. The index gave readings of 56.4 in March and 49.6 in February. IHS Markit and CIPS (Chartered Institute of Procurement & Supply), which compile the data, said the rate of expansion was the fastest since the composite index began in January 1998, and was underpinned by strong contributions from manufacturing and services.

The expansion came amid steep increases in output, new orders and employment in the manufacturing sector, and rising demand for hotels, restaurants and other consumer-facing services as hospitality, tourism and non-essential retail reopened.

The flash manufacturing PMI reading surged to 66.1 in May, the highest since this survey began in January 1992, from 60.9 in April, while the reading for services rose to 61.8 from 61. Any reading above 50 signifies expansion.

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Chris Williamson, chief business economist at HIS Markit, said: “The UK is enjoying an unprecedented growth spurt as the economy reopens. Factory orders are surging at a record pace as global demand for goods continues to revive, and the service sector is reporting near-record growth as the opening up of the economy allows more businesses to trade. Business confidence has meanwhile hit an all-time high as concerns about the impact of the pandemic continue to fade.”

Howard Archer, chief economic adviser to the EY ITEM Club, noted that the index had shown employment had risen for the third month in a row after a year of contracting, and at the “fastest rate since June 2014”.

But he observed: “Not so good news saw input prices rise at the fastest rate for nearly 13 years.”

The report noted that pressure on prices came from a “shortages of raw materials and high shipping costs, while service providers often noted increased staff salaries.”

Kieran Tompkins, assistant economist of Capital Economics, said the latest reading from the closely watched IHS Markit/CIPS index – the highest in more than 20 years – “points to the economic recovery shifting through the gears and picking up speed.”

By Scott Wright

Source: Herald Scotland

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UK business activity grows at its fastest pace since 1998

UK business activity has grown at its fastest pace for more than two decades, according to early economic data for May.

The closely-followed IHS Markit/CIPS Flash UK Composite PMI report came in at 62 for the month, up from a reading of 60.7 in April.

Any reading above 50 represents growth in output.

The reading signals that the UK has seen its strongest growth since the index began in 1998, on the back of “strong” growth in both the manufacturing and services sectors.

Relaxed pandemic restrictions and pent-up demand from consumers also helped to spark a rise in employment, with the figures highlighting the fastest rise in private sector employment for more than six years.

The services sector – which includes hospitality firms which have benefited from eased restrictions this month – saw a reading of 61.8 for the months, marginally below analyst predictions.

Meanwhile, the manufacturing reading surged to 66.1, the highest figure since the survey began.

Chris Williamson, chief business economist at IHS Markit, said: “The UK is enjoying an unprecedented growth spurt as the economy reopens.

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“Factory orders are surging at a record pace as global demand for goods continues to revive, and the service sector is reporting near-record growth as the opening up of the economy allows more businesses to trade.

“Business confidence has meanwhile hit an all-time high as concerns about the impact of the pandemic continue to fade.”

However, the rebound also resulted in price inflation with costs pressures at “the strongest for nearly 13 years”.

Duncan Brock, group director at CIPS, said: “Manufacturers keen to secure raw materials for the coming months were forward buying with greater intensity and contributing to the ongoing poor performance of supply chains as delivery times increased to record-levels.

“This in turn compounded the number of shortages and impacted on the costs of goods and raw materials.”

Source: Irvine Times

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UK inflation doubles in April as lockdown restrictions ease

UK inflation has more than doubled in April as energy and clothes prices pushed the consumer price index up to 1.5% amid the easing of lockdown restrictions.

A rise from March’s 0.7% readout, the figure comes more in line with the Bank of England’s expected rate of 2% by the end of the year.

Statistics published by the Office for National Statistics (ONS) identified rising household utility, clothing and motor fuel prices as the biggest drivers of the increase which was still partially offset by a large downward contribution from recreation and culture.

Gas and electricity saw big jumps with price rises of 9.4% and 9.1% respectively between March and April driven by a spike in global demand for wholesale gas.

A bounce in oil prices from $20 per barrel last year to around $70 today also put pressure on inflation and will continue to do so as demand increases as the global economy opens up again.

Ambrose Crofton, global market strategist at JP Morgan Asset Management, said that “a confluence of factors including Brexit-related trade frictions, rising commodity and freight prices are adding cost-push pressure” to the manufacturing side of the economy.

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End of furlough scheme could keep inflationary pressures at bay

Inflation is likely to increase further throughout the year as “the economy gradually reopens, the recovery picks up steam and supply constraints intensify in the sectors that were hit by the pandemic,” according to Silvia Dall’Angelo, senior economist at the International Business of Federated Hermes.

Dall’Angelo said higher wholesale gas prices could lead to hikes in regulated utility prices later in the autumn, pushing CPI inflation close to 3%.

But she notes that as inflationary drivers are “set to be largely cost-push and hence temporary” with residual disruption to the labour market likely to show up at the end of the furlough scheme in September, underlying inflationary pressures could be contained.

Economic recovery could be a Trojan horse for inflation

However AJ Bell financial analyst Laith Khalaf said that “at current levels, UK inflation is nothing to fret about, but there is rising concern that the fiscal and monetary response to the pandemic has sown the seeds of an inflationary scare further down the road.”

The Bank of England showed no signs of tightening the reins just yet as it announced it would make no changes to monetary policy earlier this month with interest rates remaining at 0.1% for now despite its improved economic forecasts.

Khalaf said: “For the moment, the Bank of England is dismissing consumer price increases as a natural bounce back from the depths of the pandemic last spring. But the economic recovery could be a Trojan horse, smuggling inflation into the UK, right under the nose of central bankers.”

Khalaf noted that inflationary fears are already starting to creep into the market with the 10-year gilt yielding 0.9%, up from 0.2% at the beginning of the year.

Despite this Oliver Blackbourn, multi-asset portfolio manager at Janus Henderson, notes real yields “remain very negative as guidance about interest rates continues to hold down nominal yields, even in the face of expected strong growth and rising inflation”.

“While breakeven rates on UK gilts are towards the upper end of where they have been over the last two decades, it is not clear that they are at a level that should be unduly concerning for the Bank yet.”

By Harriet Habergham

Source: Portfolio Adviser

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