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“There is pent-up demand and ambition across many sectors”

Last Friday, the Confederation of British Industry (CBI) published its latest economic forecast, which predicts UK GDP growth is set to bounce back to pre-COVID levels by the end of the year, despite the four-week delay in lifting all lockdown restrictions. The industry body said the economy looks ‘set for a breakthrough year,’ with its new projections estimating growth of 8.2% in 2021 and 6.1% next year, significant upgrades from the 6.0% and 5.2% previously forecast.

These upward revisions largely reflect the previous relaxation of lockdown restrictions, rapid vaccine rollout and unleashing of pent-up demand. CBI Director General, Tony Danker, commented, “There are really positive signs about the economic recovery ahead this year and next. The data clearly indicates that there is pent-up demand and ambition across many sectors.” Mr Danker added, “The imperative now must be to seize the moment to channel this investment into the big drivers of long-term UK prosperity” and called on the government to produce “far more detailed plans on everything from decarbonisation, to innovation, to levelling up.” 

Inflation above Bank target

The past seven days have also seen the Office for National Statistics (ONS) release a raft of economic data, including the latest inflation figures, which revealed the Consumer Prices Index (CPI) now stands above the Bank of England’s 2% target. An increase in the cost of fuel and clothes pushed the CPI rate up to 2.1% in the year to May, significantly higher than April’s 1.5% figure and above all forecasts in a Reuters poll of economists. While most policymakers still appear to believe upward price pressures will prove temporary, the higher-than-expected inflation number inevitably fuelled further debate about the future timing of interest rate movements.

Retail sales dip

Last week also saw publication of the latest retail sales statistics, which reported an unexpected drop in sales. According to ONS data, total sales volumes fell by 1.4% between April and May, as people chose to visit reopened hospitality venues rather than buying food at supermarkets. ONS commented, ‘Anecdotal evidence suggests the easing of hospitality restrictions had an impact on sales as people returned to eating and drinking at locations such as restaurants and bars.’ While strong hospitality trade suggests the disappointing sales figure is not necessarily an early sign of weaker consumer demand, some economists did point to other data revealing a fall in credit and debit card payments, and restaurant reservations in early June, as evidence that the surge in spending may be losing steam.

Government borrowing eases

Public sector finance statistics, published on Tuesday, showed that borrowing continues to fall from the mammoth levels witnessed last year. In May, the government borrowed £24.3bn; this was £19.4bn lower than last year, although still the second-highest May number ever recorded. Encouragingly, the figure was below analysts’ expectations, with signs that the recent economic recovery has started to boost tax revenues. The data also revealed government debt now stands at almost £2.2trn, or 99.2% of GDP, a ratio not seen since the early 1960s. In a statement, Chancellor Rishi Sunak reaffirmed his commitment “to support people and businesses to get back on their feet” but also stressed the need “to get the public finances on a sustainable footing” over the medium term.

Fed signals earlier rate rise

Across the pond, last week saw the Federal Reserve vote to leave US interest rates unchanged, although it did announce a further upgrade to its growth forecast, as well as a rise in anticipated inflationary pressures. The Fed now expects the US economy to grow by 7.0% across the whole of 2021, up from its March prediction of 6.5%, while this year’s inflation forecast has been raised to 3.4%, from 2.4% previously.

The US central bank also brought forward its prediction for the first rise in interest rates. The ‘dot plot’ of policymakers’ forecasts now points to two rate hikes before the end of 2023; in comparison, a majority of Fed policymakers had suggested the first hike would not come until 2024, at its previous meeting held in March.

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The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

‘Shared beliefs and shared responsibilities are the bedrock of leadership and prosperity’

The G7 Summit in Cornwall dominated headlines over the weekend, with leaders of the ‘Group of Seven’ (UK, US, Canada, Germany, France, Italy and Japan) meeting to discuss global worldwide issues, including vaccination programmes, economic recovery and climate change.

The Prime Minister hosted the 47th G7 Summit, the first meeting of global leaders in two years, which was also attended by EU representatives, including Ursula von der Leyen, and other key individuals from non-member countries, including Australian Prime Minister, Scott Morrison.

With a packed agenda to work through, after three intensive days of meetings, a communiqué was published on the conclusion of the Summit, in which the leaders collectively outlined, ‘We gathered united by the principle that brought us together originally, that shared beliefs and shared responsibilities are the bedrock of leadership and prosperity. Guided by this, our enduring ideals as free open societies and democracies, and by our commitment to multilateralism, we have agreed a shared G7 agenda for global action.’

Key pledges from the Summit include to:

End the pandemic and prepare for the future by driving an international effort to vaccinate the world by getting as many safe vaccines to as many people as possible, as fast as possible

Reinvigorate our economies by advancing recovery plans that build on the financial support put in place during the pandemic

Secure our future prosperity by championing freer, fairer trade within a reformed trading system, a more resilient global economy, and a fairer global tax system

Protect our planet by supporting a green revolution that creates jobs, cuts emissions and seeks to limit the rise in global temperatures

Strengthen our partnerships with others around the world and develop a new partnership to build back better for the world, through a step change in our approach to investment for infrastructure, including through an initiative for clean and green growth.

On Sunday, President Biden met the Queen at Windsor Castle, before progressing to Brussels for a meeting at the NATO headquarters, then rounding off his European tour with a one-to-one meeting with Vladamir Putin on 16 June in Geneva.

‘Freedom Day’ delayed

As anticipated, Boris Johnson confirmed that restrictions will not ease as initially hoped on 21 June. This will allow more people to get vaccinated, to contend with the sharp rise in infections due to the Delta variant. A review will be conducted in two weeks, with the government reserving the possibility of proceeding to step four and a full opening sooner than 19 July. Scientists have advised that the four-week delay would reduce the peak in hospital admissions by between a third and a half.

Although most current restrictions will remain in place, the 30-person limit on weddings and wakes will be removed on 21 June, but strict measures will still apply, and will vary depending on the type of venue.

Director General of the Confederation of British Industry, Tony Danker, commented on the roadmap delay, “Public health comes first, so while a delay is regrettable, it’s understandable. Most businesses favour certainty and irreversibility over speed… But we must acknowledge the pain felt by businesses in hospitality, leisure and live events. At best they’re operating with reduced capacity hitting revenues, and at worst, some aren’t open at all.”

Despite the delay to the road map, Chancellor Rishi Sunak confirmed that the furlough scheme will not be extended. The scheme is scheduled to run until 30 September, with employers contributing from July.

Around the UK – in Wales, rules will be reviewed on 21 June and in Northern Ireland, a review will take place on 17 June. In Scotland, Nicola Sturgeon has said that plans to move all areas to Level Zero COVID restrictions on 28 June would “in all probability” be paused.

UK economic update

Data released last Friday by the Office for National Statistics (ONS) showed that the UK economy grew by 2.3% in April, its fastest monthly growth since July 2020. This has been attributed to shoppers spending more as non-essential shops reopened, and people bought more cars and caravans. Chancellor Rishi Sunak said that the figures were “a promising sign that our economy is beginning to recover.”

On Tuesday, ONS said there were 197,000 more workers in payrolled employment in May than in April and the unemployment rate fell to 4.7% in the three months to April, down from 4.8% previously.

Here to help

Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

‘We will continue to work together to ensure a strong, sustainable, balanced and inclusive global recovery that builds back better and greener from the COVID-19 pandemic’

Ahead of the G7 Summit in Carbis Bay, Cornwall, later this week, where leaders from some of the world’s most influential countries are meeting to discuss major global issues, several Finance Ministers met in London at the weekend to discuss a whole host of global economic issues, including reforms to the global tax system to make it fit for the digital age. They were also joined by the Heads of the International Monetary Fund, World Bank Group and Organisation for Economic Cooperation and Development.

In what Janet Yellen, US Treasury Secretary described as a “historic achievement”, Finance Ministers from the US, UK, Germany, France, Canada, Japan, Italy and the EU, agreed to combat tax avoidance by making companies pay more in the countries where they sell their services or products. They also agreed in principle to a global minimum corporate tax rate of 15% to avoid countries undercutting each other with low tax rates. The deal is set to be discussed in more detail at a meeting of G20 Finance Ministers in Venice next month.

In a policy paper sent out following the series of meetings, the outcome was outlined, ‘We agreed concrete actions to address today’s historic challenges and as part of our renewed and urgent effort towards deeper multilateral economic cooperation.’ The strong commitment of the attendees to work collaboratively was evident, with clear follow-up intentions set out, ‘We will continue to work together to ensure a strong, sustainable, balanced and inclusive global recovery that builds back better and greener from the COVID-19 pandemic.’

Although job vacancies increase – skills shortage intensifies

A KPMG survey has highlighted how the easing of restrictions and subsequent reopening of various sectors has led to the highest demand for workers in over 23 years. Job vacancies in the UK are soaring, but candidate availability has declined at the fastest rate since 2017. According to the survey, workers are particularly needed in computing and IT, as well as the hospitality industry. As a result, KPMG has called on the government and firms to urgently address the skills gaps. Deputy Chief Executive of the Recruitment & Employment Confederation, Kate Shoesmith, commented, “With demand spiking, the skills and labour shortages that already existed in the UK have come into sharper focus – and COVID has only made them worse. This is the most pressing issue in the jobs market right now and has the potential to slow down the recovery.”

Services sector expanded at fastest rate in 24 years in May

Data released on Thursday from the UK Composite Purchasing Managers’ Index (PMI) for services, indicated that activity in the UK’s service industry grew at its fastest rate in 24 years, rising to 62.9 in May, up from 61 in April. Any score above 50 indicates growth. Economics Director at IHS Markit, Tim Moore, commented, “UK service providers reported the strongest rise in activity for nearly a quarter-century during May as the roll back of pandemic restrictions unleashed pent up business and consumer spending. The latest survey results set the scene for an eye-popping rate of UK GDP growth in the second quarter of 2021, led by the reopening of customer-facing parts of the economy after winter lockdowns.”

Travel rules updated

After a review of travel rules, an announcement was made on Thursday that Portugal (including Madeira and the Azores) was to be removed from the UK green list and placed on the amber list. The changes came into effect on Tuesday at 4am. No new countries were added to the green list and a further seven countries were added to the red list, including Sri Lanka and Egypt. All four nations are currently following the same travel rules.  

Vaccine news

Last Thursday, on the same day as official figures showed that more than half of UK adults have now had both doses, Boris Johnson received his second jab, welcoming an “amazing achievement“  and tweeting “now let’s finish the job.” Also last week, news came from the Medicines and Healthcare products Regulatory Agency (MHRA) that the Pfizer-BioNTech vaccine has been approved for use in children aged 12-15, following a ‘rigorous review.’ The Joint Committee on Vaccination and Immunisation (JCVI) must now advise government on whether this age group should be included in the UK vaccination rollout.

Here to help

Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.

“Jab by jab this life-saving programme, unparalleled in our history, is getting us back to the things we love”

Good news came over the weekend as a significant vaccination milestone was surpassed. Tipping over the marker, after over 700,000 jabs were administered on Saturday alone, the UK has now delivered over 60 million vaccinations, first and second doses combined.

Data shows that around 72% of UK adults have now had a first dose, with 44% having received both doses. The Prime Minister tweeted, “Jab by jab this life-saving programme, unparalleled in our history, is getting us back to the things we love… Please get both your vaccines when it’s your turn.”

Further positive news came over the weekend, as Public Health England research has identified that the AstraZeneca and Pfizer vaccines are highly effective against the Indian variant after two doses. Matt Hancock said receiving the second dose was “absolutely vital” and that he felt “increasingly confident” the final stage of easing restrictions in England could take place on 21 June.

After the government published advice for eight areas in England with high case numbers of the Indian variant, it was confirmed on Tuesday that the guidance is to be updated for Kirklees, Blackburn with Darwen, Bedford, Bolton, Burnley, Hounslow, Leicester and North Tyneside to clarify there are ‘no local lockdowns.’ From Monday, people in Northern Ireland have been able to return to indoor hospitality venues and meet up to six people from two households indoors. In Wales, family and friends can now visit loved ones in care homes, with Minister Mark Drakeford saying the “changes would improve the quality of life for residents and their families.” In Scotland, Nicola Sturgeon has urged people not to “lose heart” as cases increase, albeit from a very low base. Glasgow remains in level three, with restrictions to be reviewed later this week.   

Biohub launched

On Monday, the World Health Organization (WHO) and the Swiss Confederation announced plans for a global BioHub facility, to serve as a centre to enhance the rapid sharing of viruses and other pathogens between partners and laboratories globally. Dr Tedros Adhanom Ghebreyesus, WHO Director-General said, “this is an important step towards facilitating this flow of information.”

UK inflation rate more than doubles in April

The latest inflation figures for the UK were released by the Office for National Statistics (ONS) last week, showing a jump to 1.5% in April from 0.7% in March. Prices have been driven higher due to a rise in energy and clothing costs, resulting in inflation climbing at its fastest rate since March 2020. April’s inflation rise had been predicted by economists due to the easing of lockdown restrictions, but there are concerns that soaring inflation could push central banks to raise interest rates.

Further ONS data released on Friday, showed retail sales jumped 9.2% in April, due to the reopening of non-essential shops last month, which saw clothing sales increasing by 70% compared to March.

CBI advises ‘Seize the Moment’    

The Confederation of British Industry (CBI) has launched a ‘landmark’ economic plan for the next decade entitled ‘Seize the Moment’, urging both business and government to bury the Brexit hatchet and focus on building a fairer, greener economy. The CBI said it was ready to play a more proactive role in transforming the economy and it sees this year as a ‘once-in-a-generation opportunity to unite and agree to transform the UK economy.’

US stocks climb as unemployment falls

American firms are cutting fewer jobs as the economy strengthens, with new claims for unemployment benefit from US workers falling to a new pandemic low of 444,000, down from 478,000 in the previous week, the lowest since 14 March 2020. The positive job market news resulted in all major US equity indices climbing last Thursday. US stocks continued to climb on Monday as stocks benefiting from the economic reopening led the advance.

Here to help

Financial advice is key, so please do not hesitate to get in contact with any questions or concerns you may have.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated.