David Hannah

February’s growth points to a strong economic rebound ahead

 

David Hannah, principal consultant at Cornerstone Tax, discusses February’s growth and April’s potential boom 

Despite Lockdown restrictions and post-Brexit trade disruption, February saw the UK economy grow by 0.4%, according to the ONS. Although not quite a boom, this minor growth in economic output is an important foundation for the months to come, and brings ever increasing optimism that the reopening of the economy through April will bring with it an even better performance. “We’re looking for a 4-5 per cent bounce in GDP in the second quarter,” said James Smith, economist at ING. 

February’s improvement from January’s slump was in large part due to the construction sector, which increased by 1.6% thanks to both new work and repair and maintenance on existing rooms and structures. Lockdown has both provided an opportunity for home improvements, as well as new challenges for the building sector as it adapts to Pandemic restrictions and safety requirements, although Ben Dyer, CEO of Powered Now, added that “restrictions seemed to have had a negligible impact on the construction sector so far.” 

As of September, Santander estimated that three in five (61%) of homeowners carried out a DIY or renovation project during lockdown. To add to the economic activity caused by these home improvements, Powered Now CEO also noted that “the Stamp Duty extension has been a house building bonanza, so growth in the industry is no surprise”. 

Now shoppers can visit their local high streets, it is hoped that the construction sector can pass the torch to the retail and hospitality sectors in driving Britain’s GDP growth. Research by Cornerstone Tax, accountancy firm working with small businesses, illustrates this highly positive consumer sentiment – with 53% of the UK wanting to spend their money at local, independent stores. 13% even want to start their own business. This is backed by PwC, which charts the highest consumer confidence since their records began. At +8, it is an incredible 34 points higher than at the start of the pandemic. 

Output is still 7.8% below February 2020, before the first lockdown. There is much to be done, however, business optimism is high, and consumer sentiment is generous. Thanks to most client-facing services reopening on Monday, the economy is set to build off February’s minor improvements and experience rapid growth in the spring. This will be led by the industries that need it most; Britain’s pubs, bars, and high streets, and by resilient business owners that have been able to survive despite everything. 

David Hannah, principal consultant at Cornerstone Tax, discusses the optimism felt by business leaders in the UK: 

It has been a tough year for many, but the light is truly at the end of the tunnel for a nation of shopkeepers who can finally serve the public. The 12th April was a vital first step towards reopening the economy safely, and it has come just in time for many – particularly the hospitality and physical retail sectors that have struggled so much through various restrictions on economic life. 

The news that the economy grew in February, even if only marginally, is welcome news for business leaders throughout the UK. This growth is only expected to go one way: up. If the UK can keep infections low, and the vaccine rollout continues uninterrupted, April should be a month of elation as pounds head to the high street.”

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