It’s been a difficult year for the UK economy. It’s been constantly disrupted by repeated Covid-19 lockdowns that have forced many businesses to close. However, in recent weeks, financial institutions and economists have raised their forecasts for the UK’s economic performance. The latest is Barclays bank’s CEO, Jes Staley, who says that the UK is on the cusp of experiencing its biggest economic boom since the post-war period.
Here is everything you need to know.
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UK economic boom: what does Barclays bank’s CEO predict?
The UK economy experienced its worst slump in three centuries in 2020. But according to the CEO of Barclays Bank, the country’s fortunes are about to change.
Jes Staley predicts that the UK economy will grow at its fastest rate since 1948.
He stated that his bank’s economic growth forecast for the UK in 2021 is 6.5%, the highest rate in more than 70 years.
What’s behind the expected economic boom?
Staley believes the rebound will be fuelled by the successful rollout of the Covid-19 vaccination programme, as well as the release of pent-up demand accumulated during lockdown. It’s predicted that this could result in a large consumer spending spree.
He said: “There’s tremendous pent-up demand, both with the consumer and small businesses, and we see that as a result of the vaccination programme, which has been an extraordinary success in the UK.”
Barclays bank estimates that there’s an excess of £200 billion sitting in customers’ and companies’ bank accounts due to Covid-19 restrictions. Much of this money is likely to be spent once the economy begins to reopen, with Staley expecting the second half of 2021 to be a period of big economic growth.
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What are other financial and economic stakeholders predicting?
Apart from Barclays, other industry participants have provided economic forecasts for the UK, including EY ITEM Club, an economic forecasting group, and Goldman Sachs, a US investment bank.
The EY ITEM Club has predicted that the UK’s gross domestic product (GDP) will grow by 6.8% in 2021.
Goldman Sachs has issued an even more optimistic economic forecast for the UK. The bank predicts growth of 7.8% in GDP in 2021. According to this prediction, the UK economy will grow faster than the US economy, which is expected to grow by 7.2%.
Given that the UK was the worst-affected economy among the G-7 countries, this expected turnaround is nothing short of spectacular.
What could an economic boom mean for your money?
Fewer job losses
If an economic boom happens, as expected, unemployment figures could be much lower than predicted. Indeed, the EY ITEM Club has revised its unemployment peak forecast for 2021 from 7% to 5%.
This, according to the EY ITEM Club, is good news as it means that the economy is less likely to lose crucial skills and capacity and should therefore even have more scope to bounce back faster.
A stronger pound
An economic boom could result in a rise in the value of sterling. Stronger sterling means cheaper prices for imported items, including food, clothing and electricals, cheaper holidays abroad, and cheaper costs at the fuel pump.
More credit and loan availability
The economic downturn has seen many creditors tighten their lending criteria. This has been especially true for riskier groups such as first-time buyers and the self-employed.
There have been fewer 0% interest credit card deals and fewer 90% and 95% mortgage deals. This could all change with an economic boom. Getting credit and mortgages might generally become easier.
Interest rates
The government has maintained interest rates at record lows of 0.1% for the past year in order to encourage spending. An economic boom could see the government decide to revise interest rates upwards.
Higher interest rates mean faster growth of the money in your savings account. However, it also means that you might have to pay higher rates of interest for loans and mortgages.
