The UK is set to grow at its fastest rate on record this year. Encouragingly, the EY Item Club has upgraded its 2021 UK growth forecast from 5% to 6.8%. After the UK economy suffered a record fall in output last year, 2021 could be due a “bounce-back”. So I’m looking for the best UK shares to invest in right now.
Consumer confidence increased at the fastest rate in a decade in the first quarter of 2021. According to a survey of 3,000 adults, “going to a shop” was the top desired activity after lockdown restrictions end.
Shopping for the best UK shares
Fittingly, one of the best UK shares I’d buy right now is Next (LSE:NXT). This FTSE 100-listed clothing, beauty and homewares retailer runs a remarkable operation.
As restrictions end and more people venture out and about, demand for clothing should increase. Next is well-placed to benefit from this shift, in my opinion.
The crisis created several opportunities for Next, and it managed to pick up some strong brands as competitors struggled to stay afloat. It took over the spaces that had housed several beauty halls in former Debenhams stores to launch its new premium beauty chain. And it acquired a 25% stake in premium fashion brand Reiss. As the country gets back on its feet, Next could thrive in an environment with fewer competitors.
For instance, Next offers expectations of strong earnings growth, a double-digit return on capital, and an undemanding price-to-earnings ratio of 18x.
Bear in mind though, consumer sentiment could quickly reverse depending on the path of the virus. Any additional wave of infections or variants could prompt a return to restrictions. It’s a risk that should be carefully considered when investing in consumer-based stocks.
Aiming to strike
Households saved a record £238bn last year, according to figures from the Office for National Statistics. With consumer confidence returning, the UK is primed for a spending spree, in my opinion.
In addition to shopping, other areas that could see strong demand include hospitality and leisure.
Within these sectors, Hollywood Bowl (LSE: BOWL) could benefit from strong pent-up demand. Last year, trading was good when the business was allowed to open. Encouragingly, it experienced a better than expected performance during the summer, despite capacity and trading restrictions.
The leisure operator launched new initiatives including the successful debut of a mini-golf concept. And it continues to expand sites and invest in refurbishing.
Some of the best UK shares can bounce back from a crisis. Some of the hardest hit sectors in the pandemic were leisure and hospitality. As confidence returns, they could recover with strength.
That said, businesses based indoors are at greater risk from further restrictions. I’m cautiously optimistic about UK leisure businesses, but with a close eye on virus variants and vaccine progress. Also, further dilution of shares can’t be ruled out, in my opinion. Much could depend on trading progress over the coming months.
Weighing everything up, I’d happily allocate a small portion of my portfolio to this reopening stock.
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Harshil Patel has no position in any of the shares mentioned. The Motley Fool UK owns shares of Next. The Motley Fool UK has recommended Hollywood Bowl. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.