Britain’s economy is recovering from the coronavirus recession faster than expected as the vaccine rollout continues, the Bank of England will declare this week.
The central bank, led by Governor Andrew Bailey, looks set to raise its growth forecasts for the UK when it publishes its latest monetary policy report on Thursday.
In its last update in February the Bank pencilled in a 5 per cent rise in output this year following the 9.8 per cent slump in 2020. Unemployment was also slated to rise to 7.8 per cent.
Optimism: The Bank of England, led by Governor Andrew Bailey (above), looks set to raise its growth forecasts for the UK
But with the outlook improving, this looks too pessimistic.
Howard Archer, chief economic adviser to forecasting group the EY Item Club, said: ‘The economy looks to have started the second quarter very much on the front foot, benefiting from easing of restrictions and the continued vaccine rollout.
‘The further near-term support to the economy provided in March’s Budget also seems to have lifted confidence.
‘Significantly, the labour market is showing resilience and survey evidence points to more confident businesses being prepared to take on workers.’ Goldman Sachs last week said it expected the UK economy to grow by ‘a striking’ 7.8 per cent this year – the fastest post-war rate of growth. It would see Britain leave the US and the eurozone in its wake.
In another sign of the UK’s recovery, the Institute of Economic Affairs (IEA) believes no ’emergency measures’ are needed to help pay off the £2trillion national debt pile.
In a report published today, the respected think-tank said tax hikes would be ‘futile’, and instead advised Treasury officials to focus on controlling spending and introducing measures to boost growth.
After analysing other periods when the national debt shot up – during the two World Wars and the Revolutionary Napoleonic Wars of the 18th-19th centuries – the IEA said: ‘Large-scale debt is far from unknown. And it would be misguided and futile to jump to tax-raising measures.
‘The debt can be coped with and the best way of doing that is to encourage economic growth… by removing unnecessary regulation and simplifying taxes.’
Though the Bank is unlikely to hike interest rates just yet, it is expected to slow the pace of QE at this week’s Monetary Policy Committee meeting.
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