Launch of mass vaccination programme welcome: but Government expected to remain cautious in lifting restrictions

Launch of mass vaccination programme welcome: but Government expected to remain cautious in lifting restrictions

Date: 14^th December 2020

In this Perspective Ruth Lea, Economic Adviser to the Arbuthnot Banking Group, discusses the latest UK policy and economic developments:

• The mass vaccination programme was launched on 8 December, but the Government still appears to be cautious in lifting activity-damaging restrictions.
• A review of the tiers (England) is expected on 16 December. It is possible London will be transferred from tier 2 to tier 3, though there may be some relaxations elsewhere.
• GDP grew by just 0.4% in October and was still 7.9% down on pre-pandemic February's level. Consumer-facing services continue to be among the most adversely affected sectors.
• External trade (goods and services) was in small surplus in the three months to October.
• Both the Nationwide and the Halifax reported buoyant house prices for November, but they warned of slowdown to come.

Concerning central banks:

• The ECB provided more stimulus at its 10 December meeting, including a €500bn increase under the pandemic emergency purchase programme (PEPP).
• The announcement of the MPC's December meeting is due on 17 December, with no changes in policy is expected. The MPC's minutes may shed some light on the Bank's assessment of how the launch of the vaccination programme may affect the economic outlook and, hence, monetary policy.

Brexit update:

• UK-EU negotiations on the future UK-EU relationship continued last week, with no apparent resolution of the differences, and amid increasing speculation of a 'no deal scenario'.
• The PM and the Commission President Ursula von der Leyen agreed on 13 December to continue negotiations.
• The UK Government agreed, in a major concession, that the EU could have officials stationed in NI to supervise checks on goods arriving from GB, post-transition period.
• The Commission released its proposed targeted contingency measures in preparation for a possible 'no-deal scenario'. They related to basic air connectivity; aviation safety; basic road connectivity; and fisheries, stipulating 'continued reciprocal access by EU & UK vessels to each other's waters'.

Ruth Lea said 'The launch of the vaccination programme is welcome news, but caution is advised as the Government seems unlikely to change its cautious approach to lifting restrictions in the near-term. In the meantime, growth is likely to remain very subdued, if not negative. October's GDP growth was weak, whilst GDP is expected to have fallen back in November. On the UK-EU negotiations, the chances seem to be tilted towards a 'no deal scenario', which would undeniably be disadvantageous to some of our exporters to the EU. Even though average EU tariffs are low, they are high for many agricultural products and as high as 10% for motor vehicles.'

For full story: http://www.arbuthnotgroup.com/economic_perspectives_group.html

Press enquiries:

Arbuthnot Banking Group PLC:

Ruth Lea, Economic Adviser
07800 608 674, 020 8346 3482
[e-mail]
Follow Ruth on Twitter @RuthLeaEcon

Maitland:
Sam Cartwright
020 7379 4415
[e-mail]

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