ity analysts today said Britain’s strong economic recovery from the covid pandemic would not be dented by the one-month extension to lockdowns.
The UK is widely expected to expand by around 7% or 8% thanks to the success of its vaccine programme. That would be a faster recovery than other G7 nations.
Outgoing Bank of England economist Andy Haldane has said the UK economy is going “gangbusters”.
That momentum should carry the country through the hit being taken by the hospitality and travel industries from the latest lockdown policies, investors said.
JPMorgan economist Allan Monks, who is expecting 8.1% UK GDP growth this year, said: “Economically, we expect the measures to have a fairly small impact.
“Confidence and mobility have already recovered significantly, even with the current restrictions in place, while other parts of the economy less directly affected by government measures have already been normalising rapidly.”
Monks is so confident about the UK economy’s prospects that he has brought forward his expectations of the first Bank of England interest rate hike from the first quarter of 2023 to the fourth quarter of 2022.
Lee Hardman, currency strategist and economist at MUFG bank said: “Sterling barely moved after the announcement which reflects how people are pretty relaxed about the measures. We’re expecting them to have a limited impact because most lockdown measures that have been holding back the economy have already been eased.”
MUFG expects GDP growth of 7% to 8% but Hardman stressed: “A lot of that depends on how the new variant of Covid spreads. That could create more fear among the public and dampen spending. Right now, we are relatively relaxed about it but the risk is that we could have further disruption as we approach the winter period. Hopefully, though, the vaccines will be effective and most people will have received both jabs by then.”
Economists have become increasingly relaxed about the potential “scarring” impact on the UK from the Covid hit. Scarring is a term referring to the long term damage caused by an event, particularly the loss of skills in workforces hit by high levels of long term unemployment.
Hardman said: “We have become less concerned over longer term scarring as there has been no significant increase in the number of people unemployed. The hope is that when government support measures do roll off we will not see as big an impact on unemployment as once feared.”
Most economists, including at the Bank of England, have pulled back their unemployment forecasts for the peak this year from 7.5-8% to 5.5% to 6%. “Most people are still attached to the labour market so will not lose their skills,” Hardman said.
JPMorgan says the relative lack of scarring added to expectations that the Bank will move to increase rates sooner, rather than later.
Hardman said the UK would continue to outperform its EU peers due to the greater percentage of the population having received the double-jab.