Following its latest meeting held on 22nd of June, the Monetary Policy committee (MPC) judged that the existing monetary stance remains appropriate, despite inflation rising above the Bank of England’s target level.

SFFS Economic Review_Jun 21

Vaccines put a spring in investors’ step

The arrival of spring is generally a time of great optimism and this year more than ever we are all certainly in need of a fresh bout of positivity. Thankfully for investors, there do seem to be increasingly hopeful signs on the horizon, with a growing belief we are now at least starting on the road to economic recovery.

SFFS Simply Wealth_Spring 21

Our economic review is intended to provide background to recent developments in investment markets as well as to give an indication of how some key issues could impact in the future. It is not intended that individual investment decisions should be taken based on this information; we are always ready to discuss your individual requirements. We hope you will find this review to be of interest.

Although the latest gross domestic product (GDP) statistics revealed the UK suffered a record slump in 2020, there are now growing hopes the economy is on the cusp of recovery. Figures published by the Office for National Statistics (ONS), showed the UK endured a record fall in output last year as coronavirus restrictions ravaged the economy. Across the whole of 2020, GDP fell by 9.9%, more than twice as much as the largest previously recorded annual decline. However, the data did reveal a positive growth rate across the final three months of the year, meaning the UK avoided a double-dip recession. Furthermore, in the month of December alone, the economy actually grew by 1.2% after some lockdown restrictions were eased. While January’s reintroduction of stricter national lockdown measures is expected to result in first-quarter economic contraction, data from February’s IHS Markit/CIPS flash composite Purchasing Managers’ Index, paints a more optimistic picture of current activity than many analysts feared. SFFS Economic Review_Feb 21

Chancellor of the Exchequer, Rishi Sunak, delivered his second Budget on 3 March declaring that “we will recover”. The key fiscal event, which had been delayed from the Autumn due to the pandemic, centred on a £65bn three-part plan designed to continue supporting British people and businesses through the pandemic, ‘fix’ the public finances once recovery begins and lay the foundations for the future economy.

ECONOMIC FORECASTS:

The Chancellor began his statement by revealing the latest forecasts produced by the Office for Budget Responsibility (OBR) which provide hope of “a swifter and more sustained economic recovery” than previously expected. The economy is now forecast to grow by 4% this year and by 7.3% in 2022, which means it will regain its pre-pandemic level by the end of Q2 2022, six months earlier than November’s forecast implied.

In terms of public finances, the OBR expects government borrowing to rise to a peacetime record of £355bn in 2020/21 in order to fund the government’s economic support measures. As the economy re-opens and emergency fiscal support is withdrawn, borrowing is forecast to fall back to £234bn in 2021/22. The Chancellor did not set any new fiscal targets in this Budget, though he did acknowledge that tax rises would be needed in the coming years to help repair the public finances.

COVID-19 SUPPORT MEASURES:

Prior to Budget day, Mr Sunak had already announced a number of coronavirus support measures including an extension to the Coronavirus Job Retention Scheme, further support for a greater proportion of self-employed workers and details of the Restart Grant and traineeship schemes. During his speech, Mr Sunak reiterated that he “will continue doing whatever it takes to support the British people and businesses through this moment of crisis”, before confirming details of the various initiatives that will see total fiscal support rise to over £407bn over this year and next: SFFS Economic Review_Feb 21 SFFS Simply Wealth Spring Budget_Mar 21