UK consumer confidence at highest level since pandemic
UK consumer confidence in March rose to its highest level since the start of the coronavirus pandemic as non-essential businesses prepared for reopening in April. Market research firm GFK rose 7 points during March as the success of the UK’s vaccination programme has paved the way for the gradual reopening of the economy.
GFK client strategy director, Joe Staton said, “Spring is in the air on the back of well-received budget announcements, the successful vaccine roll-out and roadmaps in place for ending lockdown. All measures jumped in March with the overall index score up a robust 7 points. This marks an improvement each month into 2021.”
The revelation follows news that UK gross domestic product (GDP) in 2020 contracted by a record of 9.9%. Prior to the coronavirus pandemic, UK Prime Minister, Boris Johnson had acknowledged that the UK economy had several underlying issues that needed to be addressed and vowed to reform the country and introduce new supportive policies.
The UK Government has provided ample financial support to the public during the coronavirus crisis, helping to protect jobs and small businesses across the country. With the UK economy reopening this week, teamed with optimistic comments from Chancellor Rishi Sunak and the Bank of England (BoE), the UK is on track to make a sharp economic recovery from Q2.
UK government committed to becoming world leader in green energy
During the budget announcement in March, Rishi Sunak, gave a mandate to the BoE to purchase green bonds to support the UK government’s aim of an environmentally sustainable and resilient net-zero economy.
The comments coincide with Boris Johnson’s environmentally conscious speech at last years’ Conservative party’s virtual conference. The Prime Minister declared that the economic devastation caused by COVID-19 had carved a path for dynamic change to be achieved by 2030, promising to revolutionise homeownership, productivity, energy and teaching.
During the pointedly upbeat speech, he said the UK would “learn and improve on the world that went before.” Mr Johnson added that the government would not “go back to 2019, but do better” to ensure the UK continues to be “the greatest place on Earth.”
Among the key pledges in his speech, Mr Johnson revealed plans to “Build Back Greener” by making the UK a leader in green energy, pitching wind-driven recovery with a GBP 160m investment to support the energy sector.
The declaration is part of the government’s commitment to reach its long-term climate targets, as the UK hopes to be emission-free by 2050.
According to Mr Johnson, the new investment will support 60,000 jobs in the energy sector, while creating an additional 2,000 jobs in the manufacturing and construction sectors by 2030.
Manufacturing the next generation of offshore wind turbines has been unveiled as the first step in a ten-point plan for a green energy revolution in the UK, which is expected to be disclosed later in the year.
Boris Johnson also outlined plans to invest millions in homeownership, care homes, tackling crime, and electric vehicles, stating that the coronavirus pandemic will neither “hold the UK back nor slow us down from recovery.”
Boris Johnson vows to increase homeownership
During last years’ Conservative Party conference, Boris Johnson also said it was shameful that homeownership had plummeted and highlighted the 95% mortgage scheme for first-time buyers in his pledge to build Britain greater.
He promised to turn “generation rent into generation buy” and insisted that these new low-deposit mortgages would benefit approximately two million people looking to purchase a new home.
The Prime Minister said with 5% mortgage deposits; housing ownership will see its most significant expansion in over forty years, adding that it is a “disgraceful truth” that renters are being forced to pay “through the nose” and are unable to save for mortgage deposits.
However, he has received backlash from estate agents who have branded the new scheme as an “insult to those who find themselves priced out of homeownership as there is an inadequate supply of housing for demand.”
Yet, Johnson has argued that the government will tackle the UK’s chronic problems, including the lack of affordable homes, among other issues such as the skills deficit and insufficient transport infrastructure.
Other crucial pledges Johnson promised the British government would introduce were:
- To reform home care with an insurance-style funding scheme
- Assess the benefits of one-to-one teaching for exceptional students and those in need of extra support
- Clampdown on gang crime and drug lords, reiterating his vow to create 20,000 new police officers
- Use wind energy to power every home in the UK by 2030.
These pledges were also supported by Rishi Sunak during the budget as it was announced that the furlough scheme would be extended to the end of September, as well as an extension to the stamp duty holiday to the end of June.
UK Government financial support, as well as continued vaccination rollouts, have helped the British pound (GBP) to advance against most of its major currency rivals so far this year.
GBP losses will be short lived
The British pound (GBP) has shown resilience against a host of major currencies this year but has faltered against many of its currency competitors over recent weeks, mainly against the US dollar (USD) and euro (EUR). During today’s session, the British pound to US dollar (GBP/USD) exchange rate is attempting to recover losses, standing at USD 1.38 as the US economy continues to strengthen. It was recently reported that during March, non-farm payrolls increased by 916,000 and unemployment dipped to 6%.
The euro (EUR), however, has weakened following low vaccination rates in the Eurozone as well as rising coronavirus cases across member states, though the British pound to euro exchange rate continues to fluctuate. Today the British pound to euro (GBP/EUR) exchange rate continues to hover around the EUR 1.15 level despite strengthened UK consumer confidence.
The Organisation for Economic Co-operation and Development (OECD) have forecast that UK national output will increase by 5.1% in 2021. The prediction is a 0.9% increase from last December’s forecast and much better than predictions amongst EU countries, with France and Italy both seeing a downgrade.
As a result, it’s likely that British pound’s (GBP) losses will be short lived as Q2 is expected to be in a stronger position following the reopening of UK businesses. The predictions from the OECD indicate that the UK is benefitting considerably more from a strong COVID vaccine rollout than most other countries.