UK economy at the crossroads as lockdown ends

February 25 16:32 2021
UK economy at the crossroads as lockdown ends

There has been a reduction in the daily new confirmed coronavirus infections. However, the numbers remain higher than in the first wave of the pandemic. The government plans to relax the COVID restrictions in four stages this spring, with the seven-day average for the number of deaths within 28 days of a positive Covid-19 test has fallen to 400 from almost 1,300 in early January.

The economy is said to be at the crossroads even as the lockdown nears its end, with the number of trips taken on UK roads and public transport increasing slightly in the past month. However, according to Apple mobility data, bus and train journeys remain down by more than 50% from pre-pandemic levels.

British companies are most likely to benefit from the easing of COVID restrictions, with their shares rallying on the London stock market after a roadmap for ending lockdown in England was announced. However, there are concerns that a faster economic recovery could lead to a surge in inflation, which could force a rise in interest rates. This is coming at a time when global markets are close to record highs.

Rising food prices also remain a major cause of concern, with the consumer prices index (CPI) rising to 0.7% from 0.6% a month earlier. The Office for National Statistics (ONS) highlighted price rises on frozen fish fingers, vegetables such as cauliflowers, and premium crisps.

The rate of unemployment has unfortunately continued to rise despite furlough extension. The pandemic led to an increase in the rate of unemployment to 5.1% in the three months to the end of December from 5% in the three months to the end of November, according to data from the ONS.

Retail sales in Britain also witnessed a plunge during the third lockdown due to the closure of stores on high streets and in shopping centers. However, online sales accounted for a record 35.2% of sales in January, as more people resort to shopping over the internet.

The nation’s budget has also felt the heat, as state spending soars in response to COVID and tax revenues collapse. Public sector borrowing also rose to £8.8bn in January, the highest on record for a month when self-assessed tax receipts usually help to generate a surplus.

The real estate market has not been left out, with house prices falling due to the looming deadline of stamp duty. Experts in the property industry have warned that prices could fall dramatically in 2021 after the tax break ends and as unemployment rises.

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