Unlocking the economy

Monday 12^th April marked the first major watershed of COVID-19 restrictions this year, with shops, hairdressers and gyms reopening, and hospitality venues allowed to resume outdoor service. Based on the UK’s spending last week, people are certainly making up for lost time:

• On Monday morning (12^th April) in England, spending at hairdressers was up 500%, and spending in shops was 2.5x higher, compared to a typical pre-pandemic Monday.
• Before lunchtime on Monday morning (12^th April), spending at pubs was up 150% compared to a typical pre-pandemic Monday.
• Compared to the previous Monday (5^th April), the number of shoppers at UK retailers on 12^th April increased by over 146%.

Further, the estimated shopper spending last Saturday 17^th April was £1,013bn, with the number of people hitting the shops up 330% compared to a normal week. Across the entire week, predicted overall spending is £4.54bn with a footfall of 50.3 million people.

With shops, restaurants and pubs closed since before Christmas, these figures show the extent of the appetite for spending amongst the public, and it’s spending that the economy needs. The UK’s GDP declined 9.8% in 2020, with record levels of government borrowing outside of wartime. At the most recent count, 6 million people, representing 1/5^th of the UK’s workforce, are on furlough. At the end of February 2021, the UK economy was 7.8% smaller than it was one year ago, and by the time we reach the end of this year, the UK’s economy will only be back to where it was at the end of 2019.

Based on the spending we’ve seen this week, there is reason to be hopeful for economic recovery. During the last 12 months of restrictions, the UK population has saved an additional £180bn in their bank accounts, twice the normal amount of income saved and equivalent to 10% of the UK’s annual GDP. Whilst there is debate over how much of this will remain saved or instead be spent, these reserved funds could provide the cash injection the UK economy needs, with the Office for Budget Responsibility commenting that spending these savings could add 6% to consumption in 2021 and 2022.

The boost provided by this week’s activity shows how critical it is that we don’t lock-down again. Equally, our current half-locked status must only be halfway towards normal, and can’t be a permanent fixture until, for example, the entire population is vaccinated. Only 2/5^ths of UK hospitality businesses have the space to accommodate outdoor service, highlighting how businesses are far from normal operations. For example, the owner of Soho nightclub G-A-Y commented that they could currently only operate at 10% capacity, having lost £1.3m during the pandemic, with their current business being less about making money and more about reducing losses already incurred. Further, the footfall in shops in central London this week was lower compared to the surges seen in other parts of the country, with only half as many shoppers compared to two years ago. This highlights the damage that closed workplaces and no tourists is having on the capital.

With 47.3% of the UK population vaccinated, and the population clearly eager to get back out into shops and restaurants, this week shows that if we continue to stay on the path to unlocking, we can edge closer toward economic recovery.