UK Economy set to bounce back

12th March 2021

By Will Leyland

It’s been spoken about for what feels like much longer than it probably has, but the vast majority of economists have been talking for some time about how they expect the UK economy to recover as we make our way out of lockdown and back to normality.

Most, including Andy Haldane of the Bank of England, have spoken about a ‘big bang’ type recovery which would see an absolutely enormous pent up economic demand released just before summer, signalling a potentially historic jump in growth from around May through to the end of the year.

This so called ‘V shaped’ recovery, would see us quite quickly return to pre-pandemic performance following the release of restrictions which would see Brits spending billions in savings in a short space of time.

There is, of course, pain for many to face too as job losses in badly hit sectors will mount before they recover, however, the picture painted by most senior economists appears to be broadly positive.

The chancellor Rishi Sunak revealed this year’s budget in the past few days and has been putting some meat on the bones of those predictions, with some more detail about what to expect.

Recovery

The chancellor reported on economic forecasts from the Institute for Fiscal Responsibility who are now forecasting that the UK economy will grow by 4% in 2021 and then a massive 7.3% next year, but also said these may be revised upwards if performance exceeds their expectations.

With interest at historic lows the government expects to keep borrowing large sums through the pandemic, but the cost of this borrowing isn’t expected to rise significantly in coming years as growth keeps inflation low and presumably interest rates too.

Sunak also announced no new tax rises in the budget, welcomed by Tory MP’s as well as the opposition, as the government seeks to boost the economy through a historic recovery which should see wealth and jobs created at one of the fastest paces in our modern history.

Property

There were some encouraging announcements for landlords and property investors too with the government announcing the extension of the stamp duty holiday until June this year and the announcement of support for 95% mortgages.

This is positive news for First Time Buyers, however, it also signals good news for property owners, landlords and investors as there isn’t likely to be any significant increase in supply whilst these stimulus efforts are likely to turbo charge demand which will in turn drive prices higher.

2020 was already a historically good year for house prices, with some areas of England registering an increase of more than 8%, with most increasing above 5%.

Price rises have meant that the assets held by owners and investors increased markedly in value whilst inflation remained historically low, but has also meant that with demand far outstripping supply there has also been a bottleneck in the Private Rented Sector, which has meant a huge increase in rental demand and, subsequently, rents in privately rented homes.

With the picture in property unlikely to change in the near future, it’s expected that many landlords and investors will now use the next three months and the rest of the year to expand further into the market.

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UK Economy set to bounce back

12 March 2021

It’s been spoken about for what feels like much longer than it probably has, but the vast majority of economists have been talking for some time about how they expect the UK economy to recover as we make our way out of lockdown and back to normality.

Most, including Andy Haldane of the Bank of England, have spoken about a ‘big bang’ type recovery which would see an absolutely enormous pent up economic demand released just before summer, signalling a potentially historic jump in growth from around May through to the end of the year.

This so called ‘V shaped’ recovery, would see us quite quickly return to pre-pandemic performance following the release of restrictions which would see Brits spending billions in savings in a short space of time.

There is, of course, pain for many to face too as job losses in badly hit sectors will mount before they recover, however, the picture painted by most senior economists appears to be broadly positive.

The chancellor Rishi Sunak revealed this year’s budget in the past few days and has been putting some meat on the bones of those predictions, with some more detail about what to expect.

Recovery

The chancellor reported on economic forecasts from the Institute for Fiscal Responsibility who are now forecasting that the UK economy will grow by 4% in 2021 and then a massive 7.3% next year, but also said these may be revised upwards if performance exceeds their expectations.

With interest at historic lows the government expects to keep borrowing large sums through the pandemic, but the cost of this borrowing isn’t expected to rise significantly in coming years as growth keeps inflation low and presumably interest rates too.

Sunak also announced no new tax rises in the budget, welcomed by Tory MP’s as well as the opposition, as the government seeks to boost the economy through a historic recovery which should see wealth and jobs created at one of the fastest paces in our modern history.

Property

There were some encouraging announcements for landlords and property investors too with the government announcing the extension of the stamp duty holiday until June this year and the announcement of support for 95% mortgages.

This is positive news for First Time Buyers, however, it also signals good news for property owners, landlords and investors as there isn’t likely to be any significant increase in supply whilst these stimulus efforts are likely to turbo charge demand which will in turn drive prices higher.

2020 was already a historically good year for house prices, with some areas of England registering an increase of more than 8%, with most increasing above 5%.

Price rises have meant that the assets held by owners and investors increased markedly in value whilst inflation remained historically low, but has also meant that with demand far outstripping supply there has also been a bottleneck in the Private Rented Sector, which has meant a huge increase in rental demand and, subsequently, rents in privately rented homes.

With the picture in property unlikely to change in the near future, it’s expected that many landlords and investors will now use the next three months and the rest of the year to expand further into the market.

Will Leyland

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