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2021 – A year of two halves?

James Yerkess

James Yerkess

Founding Partner

The Bank of England says that it expects a vaccine fueled recovery in the second half of 2021. However, it has downgraded its forecast for 2021 as a whole, on the basis that H1 economic conditions will remain very challenging.

It has also left the door open to negative UK interest rates should they become necessary – although this seems to be unlikely.

The FT reports that – “The MPC cut its short-term forecasts as a result of the current Covid-19 lock-down, with output expected to dip 4 per cent this quarter. But it was more optimistic about the outlook for the second half of the year, which it assumed would be boosted by an easing of lock down restrictions and the roll-out of Covid-19 vaccines”.

The assumption of continuing success with the vaccine roll out in the UK is clearly key to all of the above -and so far so good!

It will be interesting to see exactly how much pent up demand there is for the things that have largely been denied the UK population for the last year or so – holidays, flights, hotel stays, restaurant meals etc. For those lucky enough to have remained employed throughout the pandemic, it feels like there will be substantial demand in H2. For those not in work -and especially once furlough comes to an end – its hard to see increased spending in H2.

Once again, 2021 could be a tale of two halves!

#economy #financeandeconomy