The UK’s rapid vaccine rollout and government roadmap out of lockdown are aimed resetting the economy for a faster-than-expected recovery from the effects of the Covid-19 pandemic.
As chancellor Rishi Sunak prepares to deliver his budget on Wednesday, the Telegraph reports a “spending and hiring spree” that suggests an appearance of green shoots.
Jobs and spending rebound
Weekly economic monitoring by investment bank Jefferies showed an increase in activity in February.
The bank’s hiring index of job postings has jumped from below 60% of pre-Covid levels in mid-January to 85%, up eight percentage points in a week. Its overall economic activity indicator points to GDP rebounding more than 1% in February after a 5% slump in output in January.
Meanwhile Barclays said card spending was almost back to last year’s levels in recent weeks, highlighting a jump in purchases in home improvement and furnishing, recreation, culture and hospitality.
Fabrice Montagné, Barclays’ UK economist, said there were “early signs that households have restarted spending” before the reopening roadmap was revealed.
“The prospect of further relaxations of lockdown restrictions and the success of the vaccination campaign should come with ever higher levels of economic engagement by most households,” he said.
Strong performance
Oxford Economics economist Andrew Goodwin said forecasts for 2021 growth in the UK are likely too low if the roadmap goes as planned. “The roadmap for relaxing restrictions has reinforced our view that the UK will be one of the strongest performers among the advanced economies in 2021,” he said.
With e-commerce benefiting during lockdown at the expense of the locked-down high street, Sunak is set to unveil a £5bn fund for retail firms the BBC reports.
Retail restart
Restart grants, worth as much as £18,000 per firm, will help them reopen as England eases lockdown. Around 700,000 shops, restaurants, hotels, hair salons, gyms and other businesses in England will be eligible.
Last year was the worst for so-called 'high street' retail in more than 25 years, the BBC reported, with more than 180,000 jobs lost in retail, according to the Centre for Retail Research (CRR). This year could see another 200,000 job losses the CRR has warned.
Parcel tax
According to the Telegraph, support for bricks-and-mortar retail could be partly funded by a new tax on online deliveries. The newspaper claims there is the possibility of a new green tax on every internet delivery, alongside other online tax ideas. However, it is understood Sunak has turned his back on a mooted windfall tax on the “excess profits” of internet companies.
The FT reports that the budget sees the chancellor preparing what he hopes will be “one final slug of support”, as he puts Britain on notice of tax rises to pay for the pandemic.
With the worst of the pandemic pain largely past, the OBR 2021 forecasts are expected to be for the fastest economic growth in 50 years.
With this in mind, the chancellor will probably raise the rate of corporate tax from its current 19 per cent to 20 or 21 per cent, the FT predicts - raising £3.3bn with each percentage point increase.