What the economy looks like after a tough year

4th December 2020

By Will Leyland

There’s officially light at the end of the tunnel. We’re getting closer to the end and normality is starting to get so close we can taste it. We are talking Easter time so it could realistically be another five months, but let’s be honest, in the context of a novel virus that has spread across the world like wildfire, five months isn’t too long a stretch.

With extremely encouraging trial data emerging from a number of vaccine candidates, there is now widespread expectation that at least two vaccines could be approved for emergency use as early as this week.

The government are already reported to be gearing up for one of the biggest peace time operations in the country’s history, seeking to vaccinate the majority of the population considered at risk of the virus by the springtime.

A number of prominent scientists have given this timeline their backing, suggesting that we could be a point where all restrictions are lifted before this summer.

If, and it’s a sizeable if, that comes to pass, then it will quite simply be one of the most outstanding human achievements in our entire history. A global pandemic that has turned the entire world upside down leaving entire economies scrambling may well be defeated in its tracks in less than 18 months.

Keep in mind that the previous record for vaccine approval was somewhere in the region of four years, then we must all marvel at the ingenuity, bravery and talent of the world’s scientists and the volunteers who trialed the vaccine.

The UK economy

On to where we currently stand economically then. The chancellor Rishi Sunak recently attended Parliament to give a speech to the commons to lay out exactly how much the pandemic had already cost us, how much it was forecasted to cost, and what kind of hit the economy had taken already.

The Office for Budget Responsibility (OBR) published its first analysis of the economy since March and predicted that the UK economy would take a hit to GDP over the year of just over 11%, a huge dent in productivity by any measure.

However, writing for the BBC, Faisal Islam noted “It also said that government borrowing in this year was 19% of the size of the economy, a peacetime record at just under £400bn.

And yet the paradox is that next year the amount of money it costs to fund that debt will also reach a post-war record: a record low. Since World War Two, our debts have never been bigger. And yet they’ve never been cheaper.”

It’s an interesting quirk indeed, but that is due to historically low interest rates. So it should be noted that whilst the UK economy has taken a sizeable hit, and that borrowing will be historically high, it’s never made more sense to borrow money to spend on propping up the economy whilst we see it through the worst.

Of course, headlines will concentrate on the attention grabbing snippets about records and G7 comparisons, but relatively speaking, it’s never been cheaper to service those debts and there is widespread expectation at the Bank of England that the economy is due to bounce back at an absolutely ferocious rate in 2021 once normality returns.

One good example of this paradox is the fact that UK property has scarcely been in a stronger position despite the attention-grabbing headlines.

Record price rises, record rental demand, record rental increases, record yield increases and record overall demand paint a picture that feels counterintuitive but also mightily impressive.

For industries like hospitality and travel, that will feel like scant comfort whilst they take the brunt of the blunt-force impact of lockdowns, but there should be context provided that there are other industries and sectors that are steaming ahead.

Landlords, home buyers and buy-to-let industry experts alike will no doubt be positive when it comes to the property market forecast for the next year and beyond, with the expected economic bounce back set to make UK property investment extremely profitable.

Are you interested in investing in UK property? Why not take a look at Park View, our newest investment opportunity? These luxury Liverpool studio apartments in the L3 postcode district are available from just £85,000 and offer assured NET returns of 7% for 3 years. Find out more here!

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What the economy looks like after a tough year

04 December 2020

There’s officially light at the end of the tunnel. We’re getting closer to the end and normality is starting to get so close we can taste it. We are talking Easter time so it could realistically be another five months, but let’s be honest, in the context of a novel virus that has spread across the world like wildfire, five months isn’t too long a stretch.

With extremely encouraging trial data emerging from a number of vaccine candidates, there is now widespread expectation that at least two vaccines could be approved for emergency use as early as this week.

The government are already reported to be gearing up for one of the biggest peace time operations in the country’s history, seeking to vaccinate the majority of the population considered at risk of the virus by the springtime.

A number of prominent scientists have given this timeline their backing, suggesting that we could be a point where all restrictions are lifted before this summer.

If, and it’s a sizeable if, that comes to pass, then it will quite simply be one of the most outstanding human achievements in our entire history. A global pandemic that has turned the entire world upside down leaving entire economies scrambling may well be defeated in its tracks in less than 18 months.

Keep in mind that the previous record for vaccine approval was somewhere in the region of four years, then we must all marvel at the ingenuity, bravery and talent of the world’s scientists and the volunteers who trialed the vaccine.

The UK economy

On to where we currently stand economically then. The chancellor Rishi Sunak recently attended Parliament to give a speech to the commons to lay out exactly how much the pandemic had already cost us, how much it was forecasted to cost, and what kind of hit the economy had taken already.

The Office for Budget Responsibility (OBR) published its first analysis of the economy since March and predicted that the UK economy would take a hit to GDP over the year of just over 11%, a huge dent in productivity by any measure.

However, writing for the BBC, Faisal Islam noted “It also said that government borrowing in this year was 19% of the size of the economy, a peacetime record at just under £400bn.

And yet the paradox is that next year the amount of money it costs to fund that debt will also reach a post-war record: a record low. Since World War Two, our debts have never been bigger. And yet they’ve never been cheaper.”

It’s an interesting quirk indeed, but that is due to historically low interest rates. So it should be noted that whilst the UK economy has taken a sizeable hit, and that borrowing will be historically high, it’s never made more sense to borrow money to spend on propping up the economy whilst we see it through the worst.

Of course, headlines will concentrate on the attention grabbing snippets about records and G7 comparisons, but relatively speaking, it’s never been cheaper to service those debts and there is widespread expectation at the Bank of England that the economy is due to bounce back at an absolutely ferocious rate in 2021 once normality returns.

One good example of this paradox is the fact that UK property has scarcely been in a stronger position despite the attention-grabbing headlines.

Record price rises, record rental demand, record rental increases, record yield increases and record overall demand paint a picture that feels counterintuitive but also mightily impressive.

For industries like hospitality and travel, that will feel like scant comfort whilst they take the brunt of the blunt-force impact of lockdowns, but there should be context provided that there are other industries and sectors that are steaming ahead.

Landlords, home buyers and buy-to-let industry experts alike will no doubt be positive when it comes to the property market forecast for the next year and beyond, with the expected economic bounce back set to make UK property investment extremely profitable.

Are you interested in investing in UK property? Why not take a look at Park View, our newest investment opportunity? These luxury Liverpool studio apartments in the L3 postcode district are available from just £85,000 and offer assured NET returns of 7% for 3 years. Find out more here!

Will Leyland

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