BANK CHIEF: SPRING HAS SPRUNG!
Economy ‘will power ahead’ – but we must act on risk of inflation surge
BRITAIN’S economy will bounce back from Covid-19 like a ‘tennis ball’, putting the country at the top of the G7 growth league, a Bank of England boss says today.
Chief economist Andy Haldane says the UK’s recovery will be so strong that as many new jobs could be created as lost this year, meaning ‘little or no’ further rise in dole queues.
He foresees that the UK’s performance may surpass other nations in the G7, made up of the world’s leading economies including the US, France
‘Double-digit growth’
and Germany. ‘Spring has sprung for the UK economy,’ Mr Haldane declares in an article for the Daily Mail today. But he warns that the boom will turn to bust if inflation is allowed to run riot.
A year from now, it is ‘realistic’ to expect economic activity to be ‘comfortably above pre-Covid levels’, for unemployment to be falling and for UK growth to be in ‘double-digits’.
The housing market is ‘going gangbusters’, helped by the extension of the stamp duty exemption in the Budget, he adds.
Mr Haldane admits there is a danger of a relapse if the virus is not defeated or if people and firms struggle to pay debts they ran up during lockdown.
But he writes that the economy ‘will power through’ in the coming months, ‘ moving swiftly from bounce-back to boom’. His article will be one of his last significant public comments on the UK economy before he leaves the Bank after 30 years to become chief executive of the Royal Society of Arts.
The Bank recently raised its official 2021 annual growth forecast from 5 per cent to 7.25 per cent, the highest level in almost 70 years. The economy shrank by 1.5 per cent in the first three months of this year, according to official figures, but grew by 2.1 per cent in March. It is now 8.7 per cent smaller than it was before the pandemic at the end of 2019.
Mr Haldane has consistently been one of the most optimistic voices about Britain’s recovery. He has previously said the economy will rebound like a ‘coiled spring’ once liberated from lockdown.
If he is correct in his latest views, it would be a stunning comeback by the UK economy – large parts of which were brought to a nearstandstill by Covid-19 – and a testament to the resilience of British businesses. But the miracle could turn to ashes if it sparks a wave of inflation, he warns. He is, therefore, calling for the Bank to rein back the extraordinary scale of its quantitative easing or moneyprinting to nip the risk of runaway price rises in the bud.
By the end of this year, the Bank of England will have pumped in close to £1trillion to support the UK economy since the global financial crisis more than ten years ago. Due to the expected strength of the recovery, Mr Haldane argues ‘now is the time to start tightening the tap to avoid the risk of a future inflationary flood’.
The success of the vaccination programme is encouraging people
to return ‘ with gusto’ to shops, pubs and restaurants as curbs are lifted. Mr Haldane says households have stockpiled £150billion of savings during the lockdowns.
They are now gaining confidence to splash more of their hoarded cash. One factor holding people back from spending had been the anxiety that they may lose their job because of the pandemic. But Mr Haldane says businesses, which have built up a £100billion pandemic cash pile, are keen to hire again. With vacancies swiftly approaching pre-Covid levels, he thinks unemployment may not rise much higher than it is now at just under 5 per cent.
SUPPORTED by our amazing readers, the campaign to fund a national memorial to all those taken by Covid is racing towards its £2.3million target.
And it’s been boosted by Mr Johnson, who told MPs a permanent shrine in St Paul’s would be a ‘fitting place of reflection’.
To grieving Annette Allen, it will be especially moving. Having lost her father, she’s raised £24,000 for the appeal. Amidst the darkness, a wonderful gesture.