The UK’s economy poised to spring from the substantial compression of financial energy
In a recent press release from the Bank of England, lead economist Andy Haldane assimilated the UK’s economic situation to a “coiled spring” ready to release large amounts of “pent-up financial energy”. He also commented on his expectation for consumer confidence to grow in a similar pattern due to the ongoing success of the vaccination programme. In an address to the press he commented, “with 13 million of the most vulnerable people already vaccinated, the risk of death or hospitalisation has already probably halved.” It has been calculated that if the vaccination programme continues at its current pace by the end of March, the health risk may have reduced by as much as three-quarters and even less so by the end of the second quarter. What’s more, the Bank of England’s chief economist is not alone in this opinion and is only the most recent example of experts in this field to forecast a sharp rebound in economic growth upon the expected easing of restrictions.
Thanks to the NHS vaccination programme, the immunisation of those most vulnerable in society is well underway. Subsequently, the health concerns surrounding the pandemic are expected to fade into the background as people are once again able to spend and socialise. The complete turn in sentiment is likely to be a rapid one with an immediate onset, described again as a ‘light-switch’ rather than a ‘dimmer-switch’ effect. As the public’s freedom has been severely restricted for over a year, most are holding on to the hope of resuming their social lives in a somewhat normal and safe capacity. Shared social experiences such as restaurants, bars, and cinemas are expected to be amongst the first to experience this huge release in financial energy, as was glimpsed during the ‘Eat Out to Help Out’ scheme briefly implemented in the summer previous.
This pent-up financial energy will only be exacerbated by the strengthening of the average household’s finances. Unlike any other recession the UK’s economy has faced, this one has been born out of a national prohibition on social spending and thus many have managed to accumulate capital during this time. Potentially, this could double the forecasted figures for social outings, a savings pot could mean two restaurants or pub visits a week rather than one and this could turn into a new car or a new house. In a similar respect, a number of companies have also amassed an amount of cash during the lockdowns and could invest this, once restrictions ease. Should this happen, it will then have a positive domino effect on the rate of unemployment. Companies spending more on growth or expansion strategies could equate to a higher level of recruitment and thus begin to tackle the career deficit that has begun. Naturally, this would also bode well for business investment, assisting companies by boosting their performance and productivity, which will ultimately increase the pay of their workers. The ongoing availability of various government financial support schemes further strengthens the possibility of an economic bounce-back in the aftermath of restrictions easing and the public emerging from a third national lockdown.