Roadmap to recovery?
With the vaccine roll-out continuing to gain momentum and an encouraging decline in the rate of Covid-19 infections, this week began with Prime Minister Boris Johnson announcing the UK’s roadmap out of the current lockdown. The proposed timeline has been heralded as the light at the end of the tunnel, but there has been increased reporting on its implications for the UK economy. More will be revealed by Chancellor Rishi Sunak in the upcoming Budget next Wednesday (March 3rd), but here is what we know for now.
Up and away
The guidance that travelling abroad could resume as early as May 17th provided a much-needed boost, particularly for shares in the travel and leisure sectors who were among the hardest hit by the pandemic. The roadmap’s pace reportedly exceeded the City’s expectations, seeing stocks in British Airways-owner IAG rise by 7.5% and shares in Easyjet up 7.3%. Rolls-Royce, a UK company that was severely impacted by enforced travel restrictions as a plane engine manufacturer, was the second highest riser in the FTSE 100 with shares up 6.9%.
The announcement could not have come sooner as just this week, Heathrow Airport reported a £2bn annual loss after passenger numbers during the coronavirus crisis dropped to levels last seen in the 1970s. To help enable the anticipated holiday boom, the International Air Transport Association says it expects its digital Covid-19 Travel Pass will be ready within weeks, playing an essential role towards re=opening air travel given many countries still have restrictions in place.
Johnson was criticised by some for not confirming whether the furlough scheme – due to finish at the end of April – would be extended. The scheme has helped to slow down the number of redundancies, costing the government almost £50bn to date. While it was indicated at the government’s briefing that support would continue, the Budget will outline exactly what financial aid will be in place. Ahead of this, many leading economists and industry players have warned that help will need to be ongoing to enable business recovery and to ensure workers and employers aren’t faced with a cliff edge as restrictions ease.
Job losses are clear indicators of economic instability, with the Office for National Statistics (ONS) recently reporting that UK unemployment rose to a five-year high of 5.1% in the last three months of 2020, equating to 1.74 million people. While there is still a long way to go before we return to the employment levels seen pre-crisis, the ONS added that there were some “tentative early signs” of the labour market stabilising, with a small increase in the numbers of employees paid through payroll over the past couple of months.
After weeks of deliberation and mounting pressure, the property sector will be pleased to hear reports that Rishi Sunak is preparing to extend the Stamp Duty holiday until the end of June, helping to keep activity in the market buoyant as we emerge from lockdown. The introduction of the holiday last summer caused a flurry of activity, enabling buyers to save up to £15,000 in tax. All will be confirmed in the Budget, but a holiday extension will undoubtedly safeguard the completion of multiple sales, allowing the industry to continue thriving and ensuring that the initial kick start to the economy is sustained.