This week we have seen some gloomy economic figures showing that the UK suffered a record annual slump in 2020. Last year the economy shrank by nearly 10% as coronavirus restrictions hit output, stated the Office for National Statistics (ONS).
On the positive side, The Bank of England chief economist Andrew Haldane has commented that the UK economy is like a “coiled spring” and that consumer confidence would surge back thanks to the vaccine programme. It is clear to us that the eventual lifting of restrictions will lead to a rebound of growth, we just do not have a timeline from the Government who are now remaining cautious about making announcements following many changed decisions and U-turns last year. If the vaccination continues at its current level then we can all take comfort that for this year we have hope of a return to some kind of normality.
This year’s budget will take place on the 3 March and we will keep all our clients up to date with any changes announced. We cannot predict exactly what the Chancellor will say but the two big questions are how the UK will pay off the Government spending to deal with the pandemic and how they will continue to support the hardest hit in our economy. The Government could increase taxes to raise money, but this goes against their manifesto pledge in 2019 and they might argue the pandemic changed so much that they will be forced to do so. The alternative is to reduce government spending, or we may see a combination which we think is the most likely scenario.