Re the building trade/construction, there's a clear split being noted across residential work and commercial non-residential. The basic view is that cheap money is providing home builders with a good option to get building new homes and people are having more work done to their homes to create more space to accommodate changes in working practices i.e. they expect to be working from home a lot more now that their bosses have realised how much cash they can save on real estate.
The flip side of this is that office builds have been hit massively - in November there was a stat saying office builds in London were down 50% - and investment into leisure builds such as hotels, retail parks, larger gym/health clubs etc...will definitely be down as the industry has taken a hammering.
I'd take a fairly cautious view of the year ahead and beyond. I can fully agree with the idea that SOME people have saved money and they will have some back up to spend it - whilst being 'encouraged' to spend it by the BoE and the appalling levels of interest rates offered to savers. But there's also a lot of people who have either been losing money hand over fist or are effectively on a glorified dole scheme that will eventually come to an end. Then we'll have the question of whether the companies they work for can be successful quickly enough to genuinely allow them to carry on trading after such a fallow period followed by the inevitable issues around paying back what has been borrowed to keep the country afloat. My local borough council tax is going up 5%. I got a 1.8% pay rise (and I've no doubt I'm 'one of the lucky ones'....) There will be some level of cost of living increase linked to Brexit for sure and as one of the many middle income earners across the country, I'm going to get hammered on income tax sooner or later too. Point being, that's all money I won't be able to spend boosting the economy.
Final point I'd make re the BoE announcement, is that after a near 10% drop in GDP for 2020 (my company actually thinks it was slightly worse at 10.4%) the only way is up. So there's a need to quantify was 'roaring back' really means. In footballing terms, our promotion back to League 1 under Bowyer was a recovery, but after 2 appalling seasons of cost cutting and toxicity how much of a success was it really, when compared to a club that had been in 2 out of 3 Championship play off finals and had a season in the Premier League just a few years earlier?
There's going to be a lot of water under the bridge before the country is back to anything like you could call successful, but there are going to be positives on the way; just as we'll find with Brexit too - some good things, some bad. Question is who really benefits from the good and who is most impacted by the bad? Somehow I suspect it will be the same people in the same boxes if we hadn't had Brexit and COVID hadn't existed...
I leave you with some comments from an economist. This is 100% neutral data. There's no bias, agenda or political axe to grind here, just a view from experienced people on the UK outlook:
UK real GDP decreased 2.6% m/m in November 2020, its first decline in six months, as a new round of pandemic containment measures were put in place. November output was 8.9% below its January 2020 peak. We estimate a 1.0% q/q decline in real GDP in the fourth quarter; official data will be released on 12 February.
Labor market conditions are deteriorating. The number of workers on payrolls fell 2.7% y/y, representing a loss of 793,000 jobs. The UK unemployment rate was 5.0% in the three months to November, up from 4.5% in June–August 2020. The highest incidence of job losses was among young workers aged 25 to 34 years. Unemployment is expected to rise sharply when the current furlough scheme (paying up to 80% of wages) ends. It is set to expire on 30 April, but we expect an extension.
The economy is struggling in the first quarter of 2021 because of a third national lockdown (including school closures) in England in January and February. The expected outcome is a double-dip recession with real GDP down in the first quarter.
Manufacturing PMI fell 3.4 points to 54.1 in January, as output growth eased and new orders declined slightly. Input and output prices accelerated, as producers faced temporary supply-chain disruptions caused by pandemic-related restrictions and transport delays (especially at ports).
The services PMI plummeted 9.9 points to an eight-month low of 39.5 in January, as declines in business activity, orders, and employment intensified. The national lockdown led to sharp declines in travel, leisure, and hospitality businesses.
Economic growth is expected to return in the second quarter as COVID-19 restrictions ease. The aggressive rollout of vaccines should deliver a significant step-up in real GDP growth in the third quarter. This will liberate consumer-facing services, while returning office workers will increase footfall for the hospitality and retail businesses in city centers. The positive momentum will carry forward into 2022.
With the UK’s departure from the EU Single Market and Customs Union, UK exporters face additional checks for safety and security documentation, and customs checks. While the new EU–UK trade agreement calls for zero-tariff, zero-quota trade in goods, trading relationships for much of the services economy and financial sector are undefined. UK service providers could face new regulations and licensing requirements.
After an estimated contraction of 10.4% in 2020, real GDP projected to increase 3.3% in 2021, 5.6% in 2022, and 2.6% in 2023. With an earlier recovery in consumer spending, the forecast of economic growth is raised 0.2 percentage point in 2022 and lowered 0.3 percentage point in 2023.
). I just can't see office occupation returning to pre pandemic levels. And with the lack of footfall from office workers, that in turn will affect retail as most offices are in town or city centres. We may well roar back, but it's roaring back from a very low starting point. But let's wait and see. If 2021 does turn out to be ok, but a false boom before the inevitable downturn, let's just enjoy it while we can.
