Britain’s economy springing back to life as rollout of Covid vaccines and easing of lockdown restrictions boost business
- Research group IHS Markit said the private sector is on course to record its fastest pace of growth for more than seven years this month
- Data shows the recovery got under way in March as shoppers splashed out in preparation for the lifting of restrictions on April 12
- In a boost for Chancellor Rishi Sunak, economists now believe Britain is heading for its strongest year of growth since 1988
Britain’s economy is springing back to life as the rollout of Covid vaccines and easing of lockdown restrictions boost business.
In the latest health check on the UK, research group IHS Markit said the private sector is on course to record its fastest pace of growth for more than seven years this month.
Separate figures from the Office for National Statistics (ONS) backed this up, with data showing the recovery got under way in March as shoppers splashed out in preparation for the lifting of restrictions on April 12.
Upbeat: In a boost for Chancellor Rishi Sunak, economists now believe Britain is heading for its strongest year of growth since 1988
The ONS said retail sales rose 5.4 per cent last month despite ‘non-essential’ stores remaining shut, amid strong demand for clothes as well as plants and flowers for the garden.
Sales of mobility equipment such as scooters, wheelchairs and walking aids also rose thanks to ‘older consumers who were venturing out more following the vaccination roll-out’.
The figures came just a day after a survey by the CBI found confidence among British manufacturers at its highest since 1973.
In a boost for Chancellor Rishi Sunak, economists now believe Britain is heading for its strongest year of growth since 1988. The upbeat data also supports the view of Bank of England chief economist Andy Haldane who has said Britain will bounce back like a ‘coiled spring’ once liberated from the shackles of lockdown’.
James Smith, an economist at ING, said: ‘Pretty much wherever you look, there are signs that the harsh economic winter is finally thawing.’
IHS Markit said its purchasing managers’ index (PMI) of activity in the UK, where scores below 50 show decline and above 50 show growth, rose to 60 this month having been close to 40 early this year. That was the highest reading since late 2013.
Chris Williamson, chief business economist at IHS Markit, said: ‘In more than 23 years of PMI, we have only seen one spell of faster growth than this, between August and November 2013. Business activity should continue to grow strongly in May and June as virus restrictions are eased further, setting the scene for a bumper second quarter.’
Economists believe Britain is set for growth of 5.7 per cent this year the best since 1988. JP Morgan, Oxford Economics and Bloomberg Economics expect a swifter recovery, with growth of 7 per cent-plus, that would be the best performance in the post-war era.
Andrew Goodwin, of Oxford Economics, said: ‘Consumers are champing at the bit to spend. Retail sales surged in March, even though many physical stores remained closed, while the reopening of nonessential stores and outdoor hospitality in England on April 12 appears to have generated a surge in spending over the past couple of weeks.’
BUT COVID BORROWING IS HIGHEST SINCE WW2
The mammoth cost of coronavirus has pushed Government borrowing to the highest level since the Second World War.
The state borrowed £303.1billion in the 12 months to March, the Office for National Statistics said, £246billion more than the previous year when the deficit was £57.1billion.
The shortfall as a proportion of GDP rose to 14.5 per cent, the highest since it reached 15.2 per cent in 1946.
The borrowing binge over the past year has now pushed public sector net debt above £2trillion to 97.7 per cent of GDP, a rate not seen since the early 1960s. The rise in borrowing comes as the Government tries to support individuals and businesses during the pandemic.
Michal Stelmach, senior economist at KPMG, said: ‘Rising debt is largely an unfortunate consequence of the Government’s focus on shielding the economy as much as possible from Covid. Doing otherwise could have created long-lasting scars which would be far worse for fiscal sustainability.’
Economists have warned that to repair the battered finances, tax rises will have to be implemented. Isabel Stockton, research economist at the Institute for Fiscal Studies, said: ‘With the lowest interest rates in history this is perfectly manageable, but rising interest rates could create difficulties for Government finances.’
The figures were better than previously predicted – lower than the £394billion forecast in November.