Joint managing partner Tim Clark discusses the Bank of England's revised economic forecast and reasons for cautious optimism.
Since my earlier blog article in February, the overall outlook for the UK and confidence in a strong economic recovery continues to remain high.
Following the latest meeting of the Bank of England’s Monetary Policy Committee (MPC), the Bank has upgraded its forecast and now predicts that the UK economy will grow by 7.25% in 2021, up from 5%.
The MPC voted to hold interest rates at a historic low of 0.1% and suggested that any rise is unlikely to be on the immediate horizon.
Of the first quarter of 2021, The Bank of England has said: “Spending by businesses and households fell as some firms had to close again. That fall was smaller than during the first lockdown last year. Some businesses were able to adapt to Covid restrictions, which meant that they could continue to produce their goods and services.”
It has described the measures implemented by the Bank, including maintaining low rates of borrowing and quantitative easing, as “prompt and substantial action to help households and businesses.”
Cautioning that “Covid has hit spending, incomes and jobs in the UK” and “put a big strain on UK businesses’ cash flow, threatening the livelihoods of many people,” the Bank pointed to a more positive outlook during the remainder of the year.
It said: “As more people are vaccinated, restrictions to control the spread of the virus are being lifted. People may also become more confident about spending. During lockdown some people have saved money as they been unable to spend as normal. Some of that money might be spent as restrictions are eased. Our actions should increase spending and help push inflation back to our 2% target.”
As we emerge from the challenges of the past year and begin to look forward, I believe that there are many reasons for us all to remain cautiously optimistic about a strong economic recovery in the Thames Valley region and, hopefully, across the wider UK. The building blocks to support this are already firmly in place and have underpinned Reading and the Thames Valley’s impressive performance during the past few decades.
According to the EY’s 2020 UK and Regions Economic Forecast, Reading was the fastest growing economy in the Thames Valley between 1997-2019. Last year, Reading was named as the second best place to live and work in the UK in the Good Growth for Cities 2020 index published by PwC and Demos.
Crucially, in terms of growth, a range of leading reports also continue to place Reading among the world’s leading areas for Foreign Direct Investment. In 2018/19 The Financial Times placed Reading among the top 25 most attractive cities in Europe for FDI.
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