The light at the end of the tunnel we’ve all been promised is finally beginning to materialise, with the Bank of England announcing the economy is set to rebound strongly as a result of the vaccine rollout.
Hallelujah! In this article, we’ll give you the lowdown on what the future might hold for small business owners and why there’s finally a reason to be cheerful on the horizon.
According to the Bank of England, despite an initial downturn in the economy as a result of the lockdown at the beginning of 2021, a so-called ‘rapid recovery’ is anticipated as restrictions are lifted and the vaccine programme continues to rollout.
Experts have described this as ‘excellent news’, with household spending expected to make a recovery by the Spring.
The return of consumer confidence coupled with the success of the vaccine rollout to date spells good times ahead for businesses up and down the country who can look forward to a return to normal life in 2021.
You’d be forgiven for taking this latest news with a pinch of salt, but consumer behaviour shows they’re ready and rearing to spend their cash once they’ve been given the green light to do so.
According to the latest monetary policy report, the positive vaccine news of recent months has lead to a swift and sharp increase in UK holiday bookings for later in the year, showing a willingness from consumers to start spending again.
They might sound like a bad thing, but negative interest rates are actually designed to have positive repercussions for businesses.
Interest rates, also known as the Bank of England base rate, are the most important interest rates in the UK - they determine whether or not it makes sense to hold onto your money (i.e. save it) or spend it.
The Bank of England (BoE) typically lowers interest rates when it wants consumers to spend more and save less which is exactly why current BoE interest rates are at a record low of 0.1% and the bank has warned of the possibility they could fall below zero later in the year.
The takeaway? The BoE wants consumers to start spending their money again in order for the economy to recover and flourish once more, and negative interest rates are one tool in their arsenal for achieving that.
While we’ve all been stuck at home a lot more over the past 12 months there’s been less opportunity to spend - holidays were a big no-no, we couldn’t go out to eat, and for long periods even indulging in retail therapy was a none-starter.
The result? £125 billion in savings was put away by Brits during the pandemic - and that number’s set to rise further while we’re still locked down.
It’s predicted that while some savvy savers will hold onto their extra stash, others will be keen to put it to use, and policymakers predict it’ll be those who’ve received their vaccines who’ll be the first to get spend-happy, soon followed by the rest.
And it’s not just the vaccines that are expected to impact spending, but greater job security is also shown to influence how much consumers are willing to fork out, and there’s good news in that department too.
The pandemic has had a detrimental impact on many areas of life, and one of them was employment with unemployment rates reaching new heights as a consequence of COVID-19.
Thankfully, the most recent research shows this pattern is set to change course, with UK employers reporting their strongest hiring intentions since COVID hit.
Of course, this is brilliant news for the nation’s workforce, but it’s also great for businesses and the economy, as we’ve seen employment and job security impacts on consumer spending.
All things considered, this is great news for Britain’s beloved small businesses who’ve faced, dare we say it, unprecedented uncertainty over the past year.
While we’re not out of the woods just yet, the latest projections show good times are coming.
We’ll leave you with this quote from the BBC’s economics editor, Faisal Islam:
“The economy, as well as the people, will be inoculated by the summer.”