UK recovery outstripping G7 and EU, says Bank of England chief economist Andy Haldane

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Andy Haldane said the economic rebound had been far more vigorous than expected
AFP via Getty Images

A Bank of England chief today described the British economy as “going gangbusters” but warned that the taps of emergency support may soon have to be turned off to stop inflation soaring.

The Bank’s departing chief economist Andy Haldane gave the most buoyant assessment yet of the strength of the bounceback from the deep recession triggered by the Covid-19 lockdowns.

But he has also cautioned that the risks “are still pretty acute” and that the ending of all restrictions on June 21 would be “fantastic for the economy” and “would put the mojo back into both businesses and workers”.

Mr Haldane said the economic rebound had been far more vigorous than expected as recently as “a few months ago”.

In an interview on LBC’s Nick Ferrari at Breakfast show, he said: “Growth across the UK is picking up at a real rate of knots, going gangbusters actually ... that’s a great thing to see, certainly outstripping growth, not just in Europe, in pretty much most of the other G7 big advanced economies.”

Mr Haldane, who leaves the Bank after 32 years at the end of the month, also said the beleaguered travel industry could need “sector-specific” support to help it survive through to the autumn.

GDP plummeted by a fifth last spring in the deepest recession to hit Britain for more than 300 years. However, a second downturn during the winter lockdown has been far less severe than feared and was followed by a powerful upswing in output.

Mr Haldane said the biggest hurdle still facing the UK was the end of the furlough scheme in September when state support for the wages of more than three million workers will come to an end.

He said: “It’s still the case though that a bunch of businesses are still paused, a bunch of workers are still on furlough and therefore we need to keep up the momentum to get people back into work, to get those businesses back reopened and people back into pubs and restaurants, and to do even better growth wise then from the already pretty punchy position that we’re in.”

FILE PHOTO: The Chief Economist of the Bank of England, Andy Haldane, listens from the audience at an event at the Bank of England in the City of London
REUTERS

He added that rising pay and skills shortages should encourage workers “back into the world of work I hope”.

However, he said there were also growing fears that the rate of inflation, which doubled to 1.5 per cent in April, could soon overshoot the Bank’s two per cent target.

Mr Haldane said: “Two is a pretty good number, the risk is that we might overshoot that number for longer than we planned. That is not good news. We need to avoid any temporary blip in inflation becoming embedded.”

He added: “If both pay, and costs are picking up, inflation on the high street isn’t very far behind... that may mean that at some stage we need to start turning off the tap when it comes to the monetary policy support we have been providing over the period of the Covid crisis.”

He also praised Rishi Sunak’s response to Covid-19, saying: “The Chancellor has played a blinder, I think it was just what the doctor ordered last year that we went in big and we went in fast.”

Mr Haldene’s assessment was in contrast to a warning from town hall chiefs last month, who said unemployment in London could soar to 580,000 in a year in a “painful legacy” of the pandemic.

They published a report on the risks of tens of thousands more people losing their jobs as the furlough scheme is gradually removed and as business struggle to survive after being battered by three lockdowns.

Key findings in the study by economic consultancy Volterra Partners for the cross-party London Councils group included a “core scenario” which would see unemployment peaking at 9.4 per cent — or 464,000 — of economically active Londoners by December.

A “worst case” scenario would see unemployment hitting 11.8 per cent — or 580,000 — by February next year if the economic recovery is more sluggish than expected.

Central London — Westminster, Southwark, Hackney, Lambeth, Camden, Haringey, Islington, Kensington & Chelsea, City of London, Lewisham, Tower Hamlets and Wandsworth — would see the biggest rise in unemployment, to 9.3 per cent or 169,000 under the “core scenario”.

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