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Good news at last?


Are we starting to see some good news at last?

1 –What is the Bank of England saying?

The UK has made amazing strides with its rapid Covid-19 vaccination program which according to the Bank of England will help the economy bounce back.

Although due to the tight lockdown restrictions implemented at the start of 2021, the economy is expected to shrink in Q1, Andrew Bailey, Governor of the Bank of England believes that there will be a post-COVID spending spree with the economy recovering rapidly as consumer confidence returns.

Mr Bailey described the vaccine rollout as “excellent news” and went on to say that “we do think that there is going to be a sustained recovery for the rest of the year”.

The Central Bank has held Interest rates at 0.1% and there is no expected rise in the foreseeable future which in turn will help the economy recover which is good news.

But what about the question of negative interest rates, which have been seen in countries such as Sweden, Denmark and Japan?

The Monetary Policy Committee (MPC) has held out on the prospect of imposing negative interest rates, but this could change if the post-lockdown upswing does not materialize. The MPC want to ensure that the Central Bank would be in a position to be able to use negative interest rates as a practical option but currently Mr Bailey has said “it does not wish to send any signal that it intended to set a negative bank rate at some point in the future”.

Should you wish to read more about this subject, please see Silvana Tenreyro’s (MPC Member) recent speech below:


2 – Have people’s savings increased?

Although the International Monetary Fund (IMF) stated last month that the UK had suffered the deepest contraction of all the G7 Countries, we need to keep in mind that the UK has been one of the fastest countries in the World at rolling out its vaccination program and whilst this is not a “cure all”, as people are vaccinated this has to be good news for the economy and the country as a whole as confidence is expected to return from April/May onwards.

Whilst the pandemic has had a great many effects on so many people, one of the interesting side effects is personal savings have increased – simply due to the fact that we are “locked in” with nowhere to go and nowhere to be able to spend, except when shopping for essential items.

Is the Governor of the Bank of England correct, will some people have a pot of money that they are waiting to spend? Could an increase in consumer spending be a reality for Q2, Q3 and Q4; which in turn will give the economy a much needed boost.

On the downside unemployment figures may increase when the current furlough scheme comes to an end in April, however as more and more of the population are vaccinated it is thought that a greater sense of job security will return.


3 – So, are we out of the woods?

Unfortunately, we don’t possess a ‘crystal ball’ and it is therefore incredibly difficult to predict. However, the purpose of the vaccine is to slow down the spread of the virus and reduce people’s exposure which in time might lead to the virus being eradicated.

As lockdown restrictions will start to be eased, caution is still advised. People will still need to adhere to some kind of social distancing and masks will still need to be worn certainly in shops and on public transport, but as seen on the Isle of Man recently, the UK will start to see a return to something resembling normal life in the second part of the year.

Consumer confidence and the economy growing can only be good news for business owners. So, as a business owner is now a good time to start putting preparations in place for an improved and more buoyant Q3 and Q4?

Business owners have again been further helped by Rishi Sunak, Chancellor of the Exchequer announcing new options with regard to CBILS or “Bounce Back” loans taken out during the pandemic.

Those businesses that have been struggling have been given more time to make the first repayment by allowing firms to opt for an additional six months before their first payment is due. In addition, the term of these loans has been extended from six years to ten years.

Sunak said, “Businesses are continuing to feel the impact of the extended disruption from Covid-19 and we’re determined to give them the backing and confidence that they need to get through the pandemic”.

Knowing there is support and options available, has given business owners confidence to keep going through the more difficult times, hopefully allowing them to not only survive but thrive when the economy starts to recover.