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Summary
- The British economy is poised for growth like a coiled spring, says Bank of England's chief economist.
- The year is likely to witness a sharp turnaround in the consumer sentiments, pushing up the spending.
Andy Haldane, chief economist at the Bank of England, has said that the current state of the UK economy is like a coiled spring bursting to release a huge amount of pent-up financial energy. Consumer confidence would surge back with full force of a spring because of the ongoing vaccination programme, he added.
The economist has predicted a sharp turnaround in the growth of economic output once the restrictions are eased. In fact, the vaccine rollout plan would support a sustainable recovery through the whole of this year, he observed. The central bank had earlier said the UK gross domestic product could shrink by 4.2 per cent for Q1 2021.
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Vaccination programme
Haldane said that with 13 million most vulnerable Brits already vaccinated, the risk of hospitalisation or even deaths has nearly halved, in all probability. By the end of March, this risk would have further reduced by close to three-fourth, looking at the current pace of the inoculation rollout.
The central bank had earlier said that a rebound in the national output is also dependent on controlling any new virus strains. At the same time, the success of vaccination programme would improve activity levels and lower economic uncertainty to a great extent.
Consumer confidence to bounce back
With more people having received the jabs, the health concerns would consequently fall, making people return to spending levels as before. With people staying indoors for almost a year, the turn in consumer sentiments is expected to be rapid, owing to the let out of a tall pent-up demand, felt the chief economist.
He insisted that the socialising will sharply rise, benefitting a lot of sectors such as pubs, restaurants, cinemas, sports, travel, and tourism.
The Bank of England had earlier revealed that £125 billion worth of more funds were added to the UK savings accounts last year. This figure is expected to further rise substantially over the first half of this year.
Robust finances
Haldane noted that many British households had strengthened their financial position during the lockdowns, unlike the past recessions. They would have more money to spend on not just socialising but also on buying home gadgets, a new home, or even changing their cars.
Once the coronavirus restrictions are eased, both individuals and companies are likely to invest more money. This would mean more jobs for people as well, as businesses expand their operations. Higher job security would also translate into increased spending.
At the same time, the UK government would continue to support the economic recovery through its various schemes. All this will aid in the recouping of the British economy. The BoE has also told the high street lenders to be prepared for a negative interest rate regime in near future, even though it had ruled out any immediate move towards the same.
