Retail sales rise in anticipation of a social summer. Gym memberships swell as fitness centres re-open. Queues for pubs dilate through long and convoluted routes with consumers eager to wet the whistle. The public’s excitement for the easing of COVID-19 lockdown measures is unequivocal. Nevertheless, analysts are burdened with the need to temper optimism with hard facts and predictions—will the UK’s economy recover from the pandemic?
This time last year, the UK’s future was opaque. Brexit negotiations remained uncertain, employment numbers dropped at staggering degrees. The UK reported the greatest loss in GDP over 2020 out of all G7 nations, at an unsettling 9.8%. It is therefore no easy feat for confidence in the market to have recovered the way it has, now at the highest levels since 2014. Following the easing of lock-down restrictions, and relatively consistent adherence to the UK Government’s rules, economists cast a positive projection for the UK’s economy for 2021.
A successful vaccination rollout programme, drops in infection rates, and rises in employment have all helped remedy the once-dubbed ‘sick man of Europe’ into a haven for prospective business. Some expect the UK to be the first out of other European countries to return to pre-pandemic practices. Recent studies show significant increased sales and accelerated employment from the retail sector since February, despite being affected by both the COVID-19 pandemic and Brexit-induced trade fluctuations. Advanced bookings for hotels and travel should help secure the hospitalities sector and indicates a burgeoning domestic demand for services and products this summer.
While it is likely that Brexit proceedings will frustrate the gains from an economic recovery, some research suggests that regions most vulnerable from Brexit do not coincide with those most affected by COVID-19. The PMI index has continued to rise from March coming into April to 60.1, reflecting rising business confidence in the UK markets. However, supply-chain issues and longer waiting times in delivery services should be expected as consequence of both Brexit- and COVID-19-related affairs and has certainly not gone unnoticed by interested executives and directors.
Small to Medium sized Enterprises (SMEs) have been struck hard by the COVID-19 pandemic, but there is an ostensible perception of recovery; a study conducted by Opinium Research showed an average spending by SMEs on business growth of £97,000 for 2021. The study indicates that the expenditure will go towards a plethora of operations, including expansions into digital territories, improving current products and services, and notably toward increased staff hiring and training. UK SMEs are also making progress toward green energy and sustainability goals, following increased global sensibilities of corporate governance regarding the climate crisis; institutions with an ecological agenda should feel at home.
The UK Government has also played its part. The Coronavirus Business Interruption Loan Scheme (CBILS) and Bounce Back Loan Scheme (BBLS) both provided funding for otherwise-viable businesses in need, but the programmes reached an end at the end of March 2021. This has produced a vacuum of funding for SMEs, with some fund providers acting now to mitigate risk and help streamline cashflow. Nevertheless, the Government has offered a Recovery Loan Scheme with interest rates capped at 14.99% as an alternative until its review in December 2021. However, without an interest free period on the Recovery Loan Scheme, it is advisable to seek professional advice to ensure finance applicants can obtain the most favourable terms from the market.
Current forecasts for the UK Market are therefore positive, and likely for good reason. Promising domestic demand, low infection rates, successful vaccine rollouts, and increased capital render the UK an attractive place for prospective business operations. Many are excited for the Bank of England’s Monetary Policy Report coming next week, expecting a bolstered economy for the UK. Perhaps the court of public sentiment has predicted an accurate and positive outlook for the approaching summer; for now, it feels like state and private institutions are co-operating, and it’s working.