Rising confidence set to drive UKs economic rebound

Covid19 reopening

The economy is poised to roar back to life amid high levels of business and consumer confidence, improving job prospects and a buoyant stock market.

As the lockdown is eased further today, several closely watched surveys will be published showing that confidence among companies of all sizes is at its highest level in several years.

The economy grew more quickly than previously thought in the final quarter of last year, but it still shrank by the most in more than three centuries in 2020, according to official data. However, with the vaccination programme well under way, economic data steadily improving and lockdown restrictions easing, expectations of a rapid rebound are growing.

Consumer confidence has risen to its highest level since August 2018, according to an analysis by YouGov, the pollster, and the Centre for Economics and Business Research. For the first time since the start of the pandemic, more households than not believe their finances will improve over the coming year, the research found. People feel more secure in their jobs, with sentiment close to pre-pandemic levels.

Kay Neufeld, CEBR head of forecasting, said: “We expect the positive sentiment to translate into a noticeable pick-up in economic growth in the second and third quarter of this year, supported by strong consumer spending and higher employment levels. “The end of the furlough scheme later in the year is still expected to lead to an increase in redundancies but, for the time being, consumers seem to be focusing on the opportunities ahead as the economy reopens, starting with outdoor hospitality and non-essential retail.”

A separate survey by BDO, the professional services firm, put job market optimism at a three-month high. Finance bosses of large companies now believe that the pandemic will have less of a negative impact than previously thought and are at their most optimistic in at least 14 years, according to a quarterly survey by Deloitte, the professional services firm.

Deloitte’s poll of 100 finance directors included 63 from FTSE 350 companies with a combined market value of about £550 billion. Their profit forecasts were back at the previous high of mid-2014, the survey found.

The proportion of finance directors who said that the pandemic would reduce capital spending in the next three years fell to 19 per cent from 65 per cent last summer. Twenty-nine per cent now expect to reduce hiring, down from 74 per cent last summer.

A separate survey by the Federation of Small Businesses found that confidence was at its highest since 2014. The poll of 1,648 small businesses in March found that 51 per cent expected their revenues to grow over the next three months, the highest proportion since the summer of 2015. Only 24 per cent expected sales to fall.

In the first quarter, Britain enjoyed its strongest quarter for stock market floats in 14 years, research by EY found. Twenty initial public offerings took place on London’s main and junior markets, raising £5.6 billion, more than in any opening quarter since 2007.

Last night, Jerome Powell, chairman of the US Federal Reserve, said that America’s economy was at an “inflection point” and was “about to start growing much more quickly” because of vaccinations and strong fiscal and monetary support.