UK economy set for significant boost

The UK economy is set to get a big boost as lockdown measures ease up and things start reopening. Diana Bocco takes a look at what you need to know.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

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With England’s Covid-19 restrictions finally lifting, businesses are starting to reopen and travel is returning. It seems the dark pandemic clouds hanging over the UK economy are finally starting to lift.

Adam Seagrave, global head of sales trading at Saxo Group, explains: “As the country reopens, people are eager to go and enjoy the things they’ve been deprived of for over a year. People will travel, party and go out again, meaning that the overall UK economy will get a boost.”

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While there’s a chance this could negatively impact businesses offering online services or food delivery services, others – like leisure, hospitality, entertainment and retail services – are likely to benefit.

[top_pitch]

There is more good news for the UK economy 

Despite Brexit and the impact of the pandemic on the UK economy, the British pound is expected to remain one of the strongest currencies in 2021.

“It sounds like the European Central Bank’s monetary support won’t go away in the near future, unlike what we’re seeing in other parts of the world,” says John Hardy, head of FX strategy at Saxo Group.

Then there’s the issue of inflation. In July, the UK saw stronger inflation than expected. According to Hardy, this points to a stronger pound in relation to other currencies, especially the euro. As businesses reopen and things go back to working more normally again, the travel industry should see a boost as well.

This is especially true when it comes to domestic tourism. With many international destinations still dealing with lockdowns and difficult Covid-19 situations, many Brits will travel locally instead.

How the UK economy has fared so far 

In short, not so well. In June 2021, the BBC reported that the UK economy was lagging behind many other countries when it came to Covid-19 recovery. During the first quarter of 2021, the UK economy was down 8.7% compared to the first quarter of 2019.

While a loss could be expected when comparing the economy to pre-pandemic levels, the truth is that many countries have recovered quite well. For example, China, India, Turkey and Australia have bounced back since then. And while the EU has reported general losses of about 4%-5%, the UK has fared much worse at over 8%. 

For the UK to continue bouncing back as hoped, Seagrave says a return to full employment is crucial, and for that, we need to avoid new Covid-19 lockdowns.

[middle_pitch]

Less saving, more spending? 

Recent research has shown that Brits saved a lot during the pandemic. While UK residents were only saving 7% of their income pre-pandemic, those numbers went up to 18% during lockdowns. And while many promised to save even more after things reopened, post-lockdown spending has also been a major concern. 

If you’re getting ready to spend to help the UK economy recover, first decide how much you can afford. Reorganising your budget after the long lockdown is a good idea as well, especially if you now have different expenses.

If you’re no longer saving, consider investing some of that money into a stocks and shares ISA instead. Or consider looking for a financial adviser to help you if you’re new to investing.  

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