The UK economy shows promising signs of growth with the Office for National Statistics new 25th of March release.
First, credit card purchases have increased by 7% since 7th January 2021 to 81%, February last years average, showing signs of increasing consumer confidence in the economy as individuals are willing to take on debt to make short-term purchases.
Additionally, higher footfall in retail areas also illustrates this increasing consumer confidence as more and more individuals are leaving their homes to spend, showing that more consumers are confident they will not contract COVID-19 due to the vaccination rollout.
The 21% rise of average daily ship visits in the week ending 21st March 2021 shows that business activity is increasing as firms are importing and exporting more products, illustrating that the confidence of businesses is also increasing.
Due to this increase in the number of goods and services being produced, vehicle traffic within the UK has also increased as businesses are delivering more products around the country due to online shopping being the norm for consumers now.
It is no coincidence that online job adverts have increased because of this increased business confidence. In March, job adverts were at 94% of their average level in February 2020.
This is due to a slight increase in job adverts nationwide except for in London and Northern Ireland.
So why has the rest of the country seen increasing economic activity except for these regions?
A different publication from the Office for National Statistics shows that the Greater London area has a problem as 30.4% of businesses intend to close businesses sites in the next three months, according to the Business Insights and Conditions Survey.
As well as being a significant financial sector within Europe, London is also home to a large tourist industry due to its geographical proximity to historical buildings, especially those linked to the royal family.
Due to COVID-19 restrictions, tourists are unable to enter the UK for a foreign holiday to visit the countries rich history.
Because of this, the tourist industry, which is so prevalent in London has seen a massive reduction in demand.
Consequently, hospitality, retail and other food and accommodation services have also seen a reduction in demand as footfall from tourists generates a shared form of demand across these different sectors.
So, because of the COVID restrictions imposed by global governments to prioritise public health, tourist industries have been neglected causing many of them to temporarily close, causing areas such as London to have a disproportionately high difference in economic activity.
Fortunately, the decreased demand for tourist industries is likely short-term as once the lockdown ends many consumers around the world will be eager to go on holidays to relax.
Due to large quantities of household saving during the pandemic, economists predict that increased consumption due to pent up saving from Brits alone will have the UK GDP bounce back by £16bn.
Once tourists are considered, this increase in GDP will be much larger as money will be entering the economy in the form of increased exports.
Due to exports being a component of aggregate demand, when exports increase due to a rise in tourism, Real GDP will also increase, resulting in short-term economic growth.
However, this swift economic recovery may be put on hold as there are speculations of a third wave within Europe coming to the UK.
The impact of the third wave will decrease consumer confidence as public health will be put under threat which may potentially dismantle the government’s current COVID roadmap.
Because of this, the forward guidance which the government has provided will be seen as wrong or perhaps even dishonest by some consumers, leading to a reduction in confidence.
This is significant because the longer the delays in the roadmap, the less likely it is that these industries which are linked to tourism will survive as these firms will eventually collapse.
This is because these businesses have no reliable cash inflows as they are reliant on consumers purchasing goods and services cash-in-hand.
Hence, because hospitality, food and accommodation firms still have to pay rent, electricity and other costs, they are consistently leaking cash from their businesses, with no reliable way of making that cashback, they may have to permanently shut their business.
This will have many adverse short-term effects on the economy as if the majority of the industry collapses, there will be a large number of individuals unemployed, as well as lots of spare capacity in the form of closed stores and establishments.
However, opportunistic entrepreneurs will likely take these opportunities to open new establishments once COVID restrictions are lifted to take advantage of eager consumers.
Although the third wave from Europe may pose a short-term threat to the UK economy if it hits hard, once it passes, the industries which were lost due to changes in the government roadmap are bound to bounce back as the demand for such industries will be ignited once again, so, despite the setbacks, the UK economy is showing signs of growth in the future.
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