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“I do not believe on present evidence that we need to delay our roadmap”

Despite concerns growing over the spread of the Indian variant, as clusters of the B.1.617.2 continue to be discovered across the UK, at a Downing Street briefing last Friday, Boris Johnson confirmed the planned phase three easements would proceed on 17 May, “I do not believe on present evidence that we need to delay our roadmap, but I have to level with you that this could be a serious disruption to our progress and could make it more difficult to move to step four in June.”

In areas where the variant is spreading, eligible people are being urged to get vaccinated and the army have been deployed to implement mass and surge testing. In Scotland on Friday, First Minister Nicola Sturgeon announced that Glasgow and Moray will remain under level three restrictions for at least another week, after initial research suggested an outbreak in the south side of Glasgow was being driven by the Indian variant.

As lockdown rules ease in England, Wales and most of Scotland, people are now able to hug loved ones, socialise indoors in limited numbers, and visit pubs and restaurants inside, amongst other activities. The ban on foreign travel has been lifted and replaced with the traffic light system, although people in Wales have been asked to only travel for essential purposes from 17 May. In Scotland, Nicola Sturgeon has urged people to “err on the side of caution and to staycation this summer.” In Northern Ireland, lockdown rules are scheduled to be reviewed later this week.

UK economy gathers momentum

Data released shows the UK economy contracted by 1.5% in Q1 2021, following growth of 1.3% in Q4 2020. As lockdown restrictions began to ease, robust retail spending boosted economic activity in March, with the economy estimated to have grown by 2.1%, the fastest monthly growth since August 2020. There are various expectations that the economy is set to strongly rebound this year. Chief Economist at the Institute of Directors, Tej Parikh, predicted the UK economy was now on course for a bumper bounce-back this year, “The first quarter should mark the low point for the economy in 2021. The lockdown and added costs of navigating new trading terms with the EU, limited many businesses’ trading activities at the start of the year.”

However, there are concerns about the long-term damage caused by the pandemic. Head of Economics at the British Chambers of Commerce, Suren Thiru commented, “The first quarter decline should be followed by a robust rebound in the second quarter, as the effects of the release of pent-up demand, as restrictions ease and the strong vaccine rollout, are fully felt. However, with the longer-term economic damage caused by coronavirus likely to increasingly weigh on activity as government support winds down, the recovery may be slower than many, including the Bank of England, currently predict.” 

Last week, Bank of England Economist Andy Haldane said the UK economy is set to grow at its fastest pace since the Second World War, overtaking the US, he summarised, “A year from now, it is realistic to expect UK growth to be in double-digits, activity to be comfortably above pre-COVID levels and unemployment to be falling. Such a tennis ball bounce in the UK economy would put it at the top of the G7 growth league table.”

In other economic news, the latest employment data released this week from the Office for National Statistics (ONS), shows that the unemployment rate in the UK reduced to 4.8% in the three months to March, down from 4.9% in February.

US inflation surges – markets react

Last week, the US Labor Department released a report outlining a surge in inflation in April, as the economic recovery picked up. Consumer prices increased by 4.2% in the 12 months through to April, up from 2.6% in March, marking the biggest increase since September 2008. Stock markets reacted negatively as concerns intensified that higher inflation could lead the US central bank to raise interest rates more quickly than expected. Markets have since rebounded as these concerns subside, and investors focus on the reopening of economies following restrictions.

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.

“This unlocking amounts to a very considerable step on the road back to normality”

On Monday, the Prime Minister confirmed that the next stage of easing measures will go ahead as intended on 17 May. People in England will be able to resume numerous activities, including hugging loved ones, meeting six people or two households indoors, dining inside restaurants and visiting indoor entertainment venues such as cinemas and museums. The Prime Minister commented, “This unlocking amounts to a very considerable step on the road back to normality and I am confident we will be able to go further.”

Transport Secretary Grant Shapps made a much-anticipated announcement over the resumption of international travel last week. He confirmed that the ‘Stay in the UK’ regulation will lift on 17 May, meaning leisure travel from England will no longer be illegal. Strict border control measures will be in place and different levels of restrictions will be applied to individuals returning to England from countries based on a traffic light system. In total, 12 countries and territories have been added to the green list, including Portugal and Gibraltar. The lists will be reviewed every three weeks.

Most of mainland Scotland will move to level two restrictions from 17 May and international travel will be in line with the rules in England.

Election news

Last week, election news dominated. In England, local elections took place, with the Conservatives making significant gains, adding 13 councils. The Conservatives won the Hartlepool by-election, with a resounding majority, proving a real blow to the Labour Party, which has held the seat since 1964. Labour Party leader Sir Kier Starmer expressed his bitter disappointment in losing eight councils and has since embarked on a restructure of the party. In the Welsh Parliamentary election, Labour remains in power for another five years and in Scotland, the SNP will form the next Scottish government, but have fallen short of a majority by one seat.

The Queen’s speech

On Tuesday, the Queen outlined the government’s priorities for the year ahead, as she officially reopened Parliament. In a ten minute speech in the House of Lords, she highlighted 30 laws that ministers intend to pass in the coming year, saying the government would “deliver a national recovery from the pandemic that makes the United Kingdom stronger, healthier and more prosperous than before.”

BoE forecasts stronger growth

Last Thursday, the Bank of England (BoE) announced that its Monetary Policy Committee had unanimously voted to maintain base rates at an all-time low of 0.1%. In addition, the Bank increased its UK economic growth forecast to 7.25% for 2021, a significant upgrade from February’s estimate of 5.0%. This higher figure, which would represent the fastest annual rate of growth in over 70 years, appears to all but eliminate any possibility of negative rates this year, with economists predicting base rates could now begin rising during 2022.

The growth upgrade largely reflects the rapid vaccine rollout, which the Bank said will boost consumer confidence and will pave the way for a mini-spending boom as lockdown restrictions continue to ease. However, BoE Governor Andrew Bailey did strike a note of caution, likening any recovery to “more of a bounce back” than a boom. Mr Bailey added, “Let’s not get carried away. It takes us back, by the end of this year, to the level of output that we had essentially at the end of 2019. That’s two years passed with no growth in the economy.”

More positive economic news

Data released in the past seven days has provided further evidence of an impending strong UK recovery. The closely-watched IHS Markit/CIPS Purchasing Managers’ Index (PMI) for the service sector, for instance, rose to 61.0 in April, up from 56.3 in March, representing the fastest rate of expansion in more than seven years, which IHS Markit Economics Director Tim Moore put down to “a surge of pent-up demand… following the loosening of pandemic restrictions.”

The IHS Markit/CIPS Construction PMI also added to signs of a strengthening economy. While April’s headline figure of 61.6 was marginally down from March’s six-and-a-half year high of 61.7, the survey’s gauge of new orders reached its highest level since September 2014. Meanwhile, a survey of recruitment consultants conducted by KPMG/REC found that demand for workers in the UK is currently rising at the fastest rate in 23 years.

Full-time office return unlikely

Last week provided further evidence that most employers are not intending to bring staff back to the office on a full-time basis. A BBC survey covering 50 of the UK’s largest employers found that 43 have now decided to embrace a mix of home and office working. An Institute of Directors poll suggests almost two-thirds of firms intend to introduce a hybrid model, with staff working remotely for one to four days per week, while one in ten will allow employees to work from home entirely.

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.

“A huge national effort”

During the May Bank Holiday weekend, a momentous milestone was achieved as the UK surpassed 50 million vaccine doses administered: 34,588,600 first vaccine doses and 15,500,949 second doses. As a result of the unprecedented programme, nearly 66% of the adult population have had at least one dose, ahead of the next stage of the road map on 17 May.

Health Secretary Matt Hancock, commented on the success of the programme, “These jabs are saving lives and helping us get back to normal… I want to pay tribute to everybody involved in this huge achievement – the NHS, armed forces, volunteers, councils, scientists and the British public. A huge national effort.”

This week, EU leaders are meeting to discuss plans for non-essential overseas travel, in a bid to revive the tourism industry. In the UK, the Prime Minister said the approach to foreign travel will be sensible, to avoid “an influx of disease.” In London, G7 Foreign Ministers are meeting for their first face-to-face talks in over two years; led by the UK Foreign Secretary Dominic Raab, discussions will centre around ways to defend international rules from external threats.

Across England, Scotland and Wales this Thursday, voters will be taking to the polls in the latest local elections.

UK trade deal backed by European Parliament

Last week, the European Parliament ratified the post-Brexit EU-UK trade deal, with Members of the European Parliament voting overwhelming in favour, by 660 votes to 5, with 32 abstentions. Boris Johnson hailed the outcome as a “final step in a long journey”, with the trade deal providing “stability to our new relationship with the EU as vital trading partners, close allies and sovereign equals.” Lord Frost, the UK’s Chief Negotiator, said the vote “brings certainty and allows us to focus on the future.” In an address to the European Parliament, European Commission President Ursula von der Leyen, cautioned that the UK will face tough action if it breaches the trade agreement.

Eurozone experiences another recession

As output fell due to lockdown measures, in Q1 2021, the eurozone contracted by 0.6%, the second consecutive quarterly contraction (0.7% in Q4 2020), taking the bloc into a technical recession (two consecutive quarters of negative growth). Many European economies have been severely impacted by a renewed surge in COVID-19 infections and restrictions. In the first three months of the year, Italy, Spain and Germany registered falls in output, while France rebounded slightly, growing by 0.4%. An uptick in growth is expected in the coming months, as vaccination programmes continue and subsequent easing of restrictions support consumer confidence.

Average house price reaches record high

The most recent Nationwide House Price Index shows that last month, annual house price growth rebounded to 7.1%, up from 5.7% the previous month. The data also highlights that prices increased 2.1% month-on-month, the largest monthly increase since early 2004, pushing the average house price to a new record high of £238,831, a rise of £15,916 over the last year. Robert Gardner, Chief Economist at Nationwide, commented, “With the stock of homes on the market relatively constrained, there is scope for annual house price growth to accelerate further in the coming months… Further ahead, the outlook for the market is far more uncertain. If unemployment rises sharply towards the end of the year as most analysts expect, there is scope for activity to slow, perhaps sharply.”

100 days in the job

Last Friday, US President Joe Biden, completed 100 days in office. He has devoted much of the last few months to passing a $1.9trn stimulus bill and deploying the vaccine rollout programme. Other key initiatives over the last three months or so, include re-joining the 2015 Paris Agreement to tackle climate change and setting out a $2trn infrastructure plan. The US economy is rebounding faster than expected after contracting sharply in 2020. Economic growth is expected to surpass 7% this year. Last week, the Federal Reserve kept its target range for the benchmark interest rate unchanged at between 0% and 0.25%, citing the need to continue supporting growth. Chairman Jerome Powell said there were clear signs of progress in the economy but that the recovery is “uneven and far from complete.”

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.