Britain’s economy will bounce back like a ‘coiled spring’ once liberated from lockdown, a Bank of England boss says today.
In an exclusive article for the Daily Mail, chief economist Andy Haldane insists the public are ‘desperate to get their lives back’.
He believes a ‘decisive corner has been turned’ thanks to the Covid-19 vaccine rollout – and families are ready to fuel a rapid return to prosperity with a multi-billion pound spending spree.
In an exclusive article for the Daily Mail, chief economist Andy Haldane insists the public are ‘desperate to get their lives back’
The economist claims families are ready to fuel a rapid return to prosperity with a multi-billion pound spending spree
His views are likely to be seized upon by those calling on ministers to ease restrictions as soon as possible.
‘The recovery should be one to remember, after a year to forget,’ he writes today. ‘A year from now, annual growth could be in double-digits.’
Mr Haldane predicts that by June households will have amassed ‘accidental savings’ adding up to a colossal £250billion.
He believes they will spend a big chunk on socialising after being ‘bottled in’ for months, unable to enjoy holidays or meals out. With millions of the most vulnerable already vaccinated, Mr Haldane says the chance of death or hospitalisation due to Covid-19 has already probably halved.
By the end of next month the risk may have been cut by up to three-quarters, he writes. The influential economist argues there are ‘enormous amounts of pent-up financial energy waiting to be released’ and people will grasp the opportunity once they can safely resume their normal activities.
‘Having been bottled in for a year, most people are desperate to get their lives, including their social lives, back,’ he writes. ‘When given the opportunity to do so safely, they will seize it.’
The upbeat assessment came as Boris Johnson moved to reassure Tory MPs that his plan to ease the lockdown will not be delayed, despite government scientists warning restrictions might have to continue for months.
With MPs warning against any ‘backsliding’, Downing Street confirmed the Prime Minister will set out his ‘road map’ for lifting lockdown on February 22.
No 10 also said there was ‘categorically no change’ to his ambition to begin reopening schools two weeks later, on March 8. But Health Secretary Matt Hancock warned families it was still too early to make summer holiday plans – despite having booked a break in Cornwall himself. Mr Haldane’s intervention came as:
Mr Haldane predicts that by June households will have amassed ‘accidental savings’ adding up to a colossal £250billion
Figures showed the number testing positive for the virus has fallen by almost 30 per cent in the last week;
More than 13.5million people have been given a first dose of Covid vaccine
Experts said the rollout appeared to be slashing deaths among the elderly;
A study found a new combination of drugs cut the risk of death by up to half in the sickest Covid patients.
The cash pile built up by households in lockdown has grown dramatically.
By the end of last year it stood at around £125billion and if savings continue on the current trend it will have doubled by the summer. A multi-billion pound spending binge would help revive the stricken retail, leisure and travel industries.
The Bank conservatively estimates around 5 per cent of the total accumulated savings could be spent.
Mr Haldane believes Britons are ready to splash much more, ‘fuelling a faster recovery’. If households spent a quarter of their savings this would boost growth by more than £50billion.
He says the conditions are there for firms to embark on a multi-billion pound investment drive.
Companies have amassed a collective war chest of £100billion over the last few years, because they have been reluctant to commit to major projects due to uncertainties first over Brexit and then the pandemic.
But with a trade deal and the vaccine rollout, Mr Haldane says the risks are ‘diminishing fast’.
If firms resume investing in new equipment, research and innovation, it would help to create thousands of jobs.
The Bank’s official forecast is the economy will shrink by just over 4.2 per cent in the first three months of this year due to lockdown, but will return to its pre-pandemic size by 2022.
Mr Haldane, 53, has worked at the Bank since the late 1980s. He has taken a consistently optimistic view of how the economy will recover from the virus crisis.
In a speech last year, he used the children’s character Chicken Licken, who feared the sky would fall in, to warn of how excessive gloom could send the economy into a self-fulfilling slump. Chancellor Rishi Sunak is reported to be concerned scientists are moving the goalposts on the requirements for ending restrictions – although Treasury sources last night said his focus was on ensuring this is the last lockdown of its kind.
The pandemic has sent national debt soaring above £2trillion.
Mr Sunak, who is presenting his Budget early next month, is under pressure to set out a road map to repair the UK’s finances. Many families have actually become wealthier due to the pandemic. Large numbers of middle-class professionals and comfortably-off pensioners have saved substantial extra sums as they have had far fewer opportunities to spend.
Working from home has meant millions have not needed to pay for commuting and lunches at desks.