Britain’s economic outlook: the reasons to be cheerful, and fearful | Business

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The Bank of England chief economist, Andy Haldane, believes the media has focused on the risks to the economy and downplayed the strength of the UK’s recovery. In a speech to business executives in Cheshire, he called it “Chicken Licken” economics after the children’s story character who feared the sky would fall on its head after it was hit by an acorn.

So what is the good news that Haldane thinks we should be focused on – and the bad news he would rather we didn’t dwell on too much?

Reasons to be cheerful:

  • The Bank of England expects GDP to increase by 20% in the third quarter, or by about 1.5% a week.

  • The fast recovery will leave the economy about 3-4% below its pre-Covid level by the end of the third quarter – not the 18% the BoE forecast in May.

  • UK consumers have adapted and have been spending most of their money, albeit on different things, such as food and households goods. Consumption has been rising by about 2% a week since May.

  • Online spending has increased from 20% to almost 27% of overall spending during the course of this year, creating a more resilient retail environment when another lockdown is possible.

  • The government furlough scheme proved effective and has so far limited the rise in unemployment during the pandemic to 4.1%.

  • Home buying boomed in August and September, with the highest number of transactions in 13 years recorded last month and record purchase prices this month.

Reasons to be fearful:

  • Job losses have totalled more than 1 million and are expected to rise further once the furlough scheme ends next month.

  • Many City economists believe the UK economy will still be 5.5% short of its pre-Covid size by Christmas as furloughed workers are made redundant and consumer spending stalls.

  • Difficult Brexit negotiations and further local lockdowns may be deterring businesses from making investments in the UK. Business surveys suggest investment is still 20-30% below its pre-Covid level.

  • Big parts of the economy – from wedding planning businesses to sporting events and nightclubs – remain shut, with little sign of reopening.

  • So-called “flash” estimates of economic activity – the most up-to-date indicators – suggest the best period of economic growth has passed.

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Source: The Guardian
Keyword: Britain’s economic outlook: the reasons to be cheerful, and fearful | Business

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