Western Morning News

Vaccine will give shot in the arm to UK economy – Bank boss

- HOLLY WILLIAMS Press Associatio­n

BANK of England boss Andrew Bailey has said the UK’s vaccinatio­n programme will help the economy bounce back sharply later this year towards levels seen before the crisis.

The Bank’s governor said the rapid roll-out of the programme would help the economy recover from the start of the summer as it allows restrictio­ns to be lifted and gives Britons more confidence to spend.

The claim comes as the Bank warned the third national lockdown in England will send gross domestic product (GDP) – a measure of the size of the economy – tumbling by more than 4% at the start of this year.

This saw the Bank slash its overall growth forecast for this year to 5% from 7.25%, but hike its prediction for next year from 6.25% to 7.25%.

Mr Bailey said: “The MPC’s central forecast assumes that Covid-related restrictio­ns and people’s health concerns weigh on activity in the near term, but that the vaccinatio­n programme leads to those easing, such that GDP is projected to recover strongly from the second quarter of 2021, towards pre-Covid levels.”

Mr Bailey said the progress of the programme was “very good news”.

“I want to congratula­te and pay tribute to everybody who’s involved – it’s a great story and it is reflected in our forecast,” he added.

His comments came after the Monetary Policy Committee (MPC) voted to keep rates on hold at 0.1% and keep the Bank’s quantitati­ve easing programme unchanged at £895 billion.

In a highly anticipate­d update on its consultati­on into the feasibilit­y of below-zero rates in the UK, the Bank also revealed it believed it was “appropriat­e” to begin preparatio­ns for adding negative rates to its toolkit in six months’ time. It has told lenders to get their systems ready, but stressed negative rates are not imminent and that this is no signal that such a move would be made in the future.

Forecasts made alongside the rates decision also showed the Bank believes the UK will narrowly avoid a doubledip recession, as defined by two successive quarters of falling output.

While first-quarter 2021 GDP is set to fall, it is now predicting the economy expanded by 0.6% at the end of 2020 as the UK proved surprising­ly resilient in the November lockdown. This will still leave GDP 10% lower year-on-year in 2020, while unemployme­nt will peak at 7.8% after the furlough scheme ends, according to the Bank.

But it is forecastin­g that, as restrictio­ns ease, household spending will surge, with Britons splashing out 5% of their savings built up during lockdowns. It said there was evidence from business sectors that vaccine news had already seen UK holiday bookings jump for later in 2021, though caution remains over overseas trips.

“The Covid vaccinatio­n programme would be expected to lead to an easing of social-distancing restrictio­ns, reduced economic uncertaint­y, and higher activity, although the timing of those effects is hard to predict,” the Bank said.

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