The Bank of England said on Thursday that the UK economy would enjoy a stronger than expected recovery this year as the country eases its coronavirus pandemic lockdowns quicker than earlier anticipated.
The improved outlook comes as the BoE kept its main interest rate at a record-low 0.1 per cent following a regular policy meeting this week.
The UK economy is expected to rebound by 7.25 per cent this year thanks to ‘the slightly earlier easing of restrictions’, the central bank said in a statement as it upgraded its prior guidance of a 5-per cent expansion.
The UK economy tanked by 9.8 per cent in 2020, Britain’s biggest slump in three centuries — and the worst G7 performance — on the back of Covid-19 lockdowns.
Activity is now expected to rebound this year after England’s latest Covid-19 lockdown, which was implemented in early January, was partially eased last month following rapid progress in the national vaccination drive.
‘The outlook for the economy... continues to depend on the evolution of the pandemic, measures taken to protect public health, and how households, businesses and financial markets respond to these developments,’ the BoE said in a statement.
The BoE also voted at its Wednesday meeting to maintain the vast amount of stimulus pumping around the UK economy.
As the pandemic erupted in March 2020, the BoE slashed its key interest rate to a record-low 0.1 per cent, where it has remained.
It also began pumping huge sums of new cash into the economy.
The bank has created £450 billion ($626 billion, 522 billion euros) under its quantitative easing stimulus programme since March last year, when Covid-19 prompted Britain’s first coronavirus lockdown.
Prior to this it had pumped hundreds of billions of pounds worth of QE into the UK economy over a decade in the wake of the 2008-09 global financial crisis and Brexit.
The central bank’s total QE package stands at £895 billion.
The BoE on Thursday said ‘developments in global GDP growth have been a little stronger than anticipated, and the substantial new US fiscal stimulus package should provide significant additional support to the outlook’.
But it cautioned that ‘the outlook for the economy, and particularly the relative movement in demand and supply during the recovery from the pandemic, remains unusually uncertain’.
Alongside the BoE support, prime minister Boris Johnson’s Conservative government has spent £352 billion in emergency measures since the outbreak of Covid-19.
A large part has gone on a jobs furlough scheme that has paid the bulk of private sector wages for millions of workers across the UK.
The state’s emergency pandemic support measures have, meanwhile, sent UK annual borrowing rocketing to the highest level since World War II.
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