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Is the UK economy out of the woods?

Is the UK economy out of the woods?
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After the shocks of the Covid-19 pandemic and Brexit, is the UK economy coming out of the woods? Kalkine Media seems to think we are starting to see the green shoots of revival. But what factors will drive economic recovery? And how certain is it that the UK is on the up?

Let’s take a look.

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Green shoots of revival?

It is safe to say that 2020 was a tough year for the UK economy. The shadow of Brexit was always going to cause issues. But the arrival of the coronavirus pandemic meant that the UK economy shrank by 9.9% in 2020 – its biggest annual decline in 300 years.

However, moving into 2021 we are starting to see some positive signs. According to equity research and media firm Kalkine Media, unemployment rates have fallen for two straight months and retail sales picked up in March.

Private sector growth is at an eight-year high and February saw a partial recovery in EU exports. All in all, positive economic growth signs are starting to appear.

Months of successive lockdowns have led to pent-up demand. Just think of all those shoppers that queued up early in the morning for the reopening of Primark. People want to start spending their money. And with shops and restaurants reopening, economists are predicting increased footfall in shopping hubs and on the high street.

What does the future hold for the UK economy?

The recent positive economic momentum has led Goldman Sachs to predict that the UK economy will grow by 7.8% in 2021. This is higher than the prediction for the US, where the economy is currently forecast to grow by 7.2%.

However, as we have learnt along the way, nothing is predictable when it comes to the coronavirus pandemic. The UK’s future economic growth is largely dependent on the country’s current vaccination drive.

As Kalkine Media commented, “going forward, a successful and universal vaccination drive would help the NHS in preventing a third wave, expected in late summer”.

While we may expect a summer of fun to provide a boost for the UK economy, a repeat of what happened last Autumn is on everyone’s minds. A successful vaccination programme is key to large parts of the economy being able to open up again – and stay open.

Meanwhile, having the majority of the population vaccinated will help remove some of the uncertainty. Businesses can start to make decisions again, such as hiring new workers.

While there will be some impact felt as government support programmes like furlough and the stamp duty holiday come to an end, there is hope that with enough positive momentum this won’t feel like a cliff edge.

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How does this impact you?

It is sometimes hard to see how the UK economy as a whole can affect your personal finances.

An increase in consumer confidence and a reduction in the rate of unemployment is a good thing. Positive feelings about the economy have a knock-on effect. It means that the stock market is less volatile, so investments and pensions are more likely to grow.

If conditions continue to improve, then lenders may loosen their lending criteria. In 2020, we saw the number of 0% deals on credit cards significantly reduce. But if the economy recovers, providers may feel more confident and therefore offer more competitive rates and promotions.

However, everyone’s personal finances are different. If you want to keep control of your finances, budgeting is a useful tool. Also, using comparison sites to find the best deal for your circumstances can make a big difference. If you are looking for savings, investment platforms or credit cards, we provide in-depth reviews on the products we think are some of the best around.

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