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News Update – Inflation, COVID Variants and More Disrupt Recovery

Don’t start celebrating wide-scale economic recovery just yet. As COVID-19 continues to rise in some parts of the world, the threat of variants and resurgences, and various economic factors threaten a permanent return to economic prosperity any time soon.

This does not constitute advice and advice should be sought in all instances before acting on it. The Financial Conduct Authority does not regulate tax advice. 

Back tracking on easing of government restrictions

Even though the vaccine rollout instilled confidence in the UK people, the number of new confirmed coronavirus cases has prompted a back track on the latest easing of government restrictions on 21 June. But with many eager to return to some semblance of normalcy, most things are making a comeback. For example, public transportation use and travel in all forms is coming back up to pre-pandemic levels. Despite many adhering to precautions, the potential for infection is still prevalent as the country hasn’t reached full vaccination levels yet.

Inflation could also possibly hinder recovery.

More than doubling to 1.5% in April due to a rise in oil prices and household gas and electricity bills, it still remains under the Bank of England’s 2% target. 

Experts expect the hike to be temporary, mostly in response to the decline from last year, but if the cost of living increase, in turn, there could be more permanent problems to contend with.

The economy

Even though many businesses are ready to start hiring again and the unemployment rate has fallen, as the end of the furlough scheme approaches, economists worry that the increase in unemployed workers will have a negative impact on recovery.

The economy has been doing well in recent months, with government borrowing down £16bn in April from the same time last year. But the figure –  £31.7bn – is still the second highest April on record. The government’s focus is still on economic recovery, so expect their decision making to reflect that sentiment throughout the rest of the year.

The long-term outlook

Cautious optimism is perhaps the best attitude to have when it comes to the UK’s economic recovery. As has been the case over the last year, the situation is constantly evolving, changing from one moment to the next, so it’s hard to make any long-term plans.

To be sure your finances can roll with the punches, set aside some time to review your financial plan with your financial adviser. Get in touch with us today.

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