IMF predicts UK economic bounce-back this year to match resurgent US
Britain’s economy will grow faster than any major economy in Europe as it rebounds from the COVID-19 recession and emerges from lockdown, the International Monetary Fund (IMF) has predicted.
In the latest update to its World Economic Outlook – its periodical look at the state of the global economy – the IMF forecast that the UK economy would grow by 7% this year, the strongest year for economic growth since comparable records began following the Second World War.
The UK’s forecast growth rate would represent the joint-strongest rate in the group of seven leading industrialised nations alongside the US, which is also expected to expand by 7%.
IMF chief economist Gita Gopinath said it estimated the pandemic had reduced per capita incomes in advanced economies by 2.8%
The UK growth rate this year is stronger than Germany (3.6%), France (5.8%) and Italy (4.9%), though the UK economy contracted more than those other countries in 2020.
The IMF’s updated forecasts also anticipate the UK growing by 4.8% next year, implying that the UK economy will regain its pre-COVID levels around the turn of the year.
However, while the UK is expected to rebound quickly, it is not expected to regain all the lost potential growth sacrificed during the pandemic – something which is not true of the US, which the IMF expects to be stronger, on a GDP basis, following the pandemic than was anticipated before it struck.
The IMF said that the main fault line in the global economy in the coming years would be between those countries with high vaccination rates and those mostly emerging economies with lower levels of immunisations.
Its chief economist, Gita Gopinath, said: “We estimate the pandemic has reduced per capita incomes in advanced economies by 2.8%, relative to pre-pandemic trends over 2020-2022, compared with an annual per capita loss of 6.3% a year for emerging market and developing economies (excluding China).”
Considering the likely impact of the Delta variant of COVID, the IMF said: “In countries with high vaccination coverage, such as the United Kingdom and Canada, the impact would be mild; meanwhile countries lagging in vaccination, such as India and Indonesia, would suffer the most among G20 economies.”
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In spite of growing disquiet about rising prices of goods and services around much of the developed world, the Fund said it expected high inflation levels to abate in the coming years, saying that many of the price rises reflected temporary factors.
However, it added that this was “subject to significant uncertainty given the uncharted nature of this recovery”.
“More persistent supply disruptions and sharply rising housing prices are some of the factors that could lead to persistently high inflation,” the IMF said.
“Further, inflation is expected to remain elevated into 2022 in some emerging market and developing economies, related in part to continued food price pressures and currency depreciations – creating yet another divide.”
Chancellor Rishi Sunak said of the Fund’s findings: “There are positive signs that our economy is rebounding faster than initially expected, with the IMF forecasting the UK to have the joint highest growth rate in 2021 among the G7 economies.
“That said, we still face challenges ahead as a result of the impact of the pandemic, which is why we remain focused on protecting and creating as many jobs as possible through our Plan for Jobs.”
Premier Inn owner Whitbread is set to axe around 1,500 UK jobs as part of plans to build more hotel rooms and slash its chain of branded restaurants by more than 200.
The company said, while announcing a 36% hike in annual profits to £561m, that it was to begin a consultation on cutting roles under an “accelerating growth plan”.
That was to focus on hotel investment, Whitbread explained, that could see some of the jobs saved through redeployment.
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The group’s restaurant arm includes the Brewers Fayre and Beefeater brands.
The division has dragged on Whitbread’s performance since the pandemic, with the end of public health restrictions being followed by the energy-led cost of living crisis that has raised costs and damaged consumer spending power.
The company, which employs 37,000 staff in the UK, said it was to “optimise” its food and drink offering to add more than 3,500 hotel rooms across its estate and increase “operational efficiencies”.
Whitbread said it wanted to sell 126 of its less profitable branded restaurants, with 21 sales already having gone through.
Brewers Fayre, the pub/restaurant chain, is among Whitbread’s brands
It will also convert 112 restaurants into new hotel rooms.
The company revealed a 2% dip in sales across its food and beverage arm in the first seven weeks of its financial year to date.
Dominic Paul, Whitbread’s chief executive, said: “We recognise that our transition will impact some of our team members so we will be providing support throughout this process and we are committed to working hard to enable as many as possible of those affected to remain with us.”
Shares were down almost 15% in the year to date ahead of the company’s announcements.
They rose by 1.7% at the open.
Analysts said it reflected the focus on achieving more profitable growth in the UK core market and a rise in awards covering the year to 29 February.
They included plans for a share buyback of £150m on top of a £110m final dividend.
The latter award was 26% up on the previous year’s payout.
Border checks on food and plant imports will add billions of pounds to the cost of doing business with the European Union, industry figures have warned.
From today European imports considered a “medium risk” to UK biosecurity will face physical inspection as part of a new border regime introduced almost eight years after the Brexit vote, and delayed five times in two years.
Plant and animal inspectors will examine a proportion of imported goods including fresh meat, fish, and dairy produce, a process that importers fear will disrupt supply chains, particularly for time-critical fresh goods.
The physical checks come three months after the introduction of new documentation for imports, including health certificates that require vets and plant inspectors to sign off consignments.
With importers also facing a charge for each consignment that comes into the UK irrespective of whether it is stopped for inspection, the government admits it will add more than £330m to annual business costs, and add 0.2% to food inflation over three years.
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The Cold Chain Federation, which represents cold and frozen goods importers, believes government estimates are low, and puts the cost in billions.
“We think there’s going to be a billion pound’s worth of extra cost put onto food coming through Dover port alone, if you expand that to the rest of the country you’re looking at all sorts of money, so it won’t be 0.2%, it will be substantially more than that and the consumer will see that increase,” chief executive Phil Pluck told Sky News.
“Restaurants, delicatessens, fish and chip shops could well be affected by what’s currently happening today and the consumer, in the very near future will start to see some of those food products going up in price.”
The government insists the checks are necessary to keep food and plant-borne diseases including African swine fever out of the UK, and the cost of introducing the checks is “negligible” compared to the impact of a major disease outbreak.
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Christine Middlemiss, the UK chief veterinary officer, said: “Now that we’re out of the EU and we can have our own biosecurity regime, we treat independently with other countries around the world so it’s important we’re managing our own biosecurity risks at the moment we’re at medium risk of incursion of a disease called African swine fever which is present in Germany and Italy and a number of countries in Europe.”
Smaller independent food importers fear they will be disproportionately affected by the new border regime as they lack the scale to mitigate costs or set up European subsidiaries to handle the process.
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Stefano Vallebona came to the UK 40 years ago from Sardinia and began providing London’s top restaurateurs with high-quality European produce. He says the new red tape will discourage small suppliers from doing business with the UK and ultimately reduce choice.
“All the pasteurised cheese, they already have extra European certificates, and when you talk to suppliers they’re not so keen, probably because they’re too small, because it’s new and it’s time consuming, so we’re going to have less speciality products.
“We will have less interesting cheeses, less interesting meats, and probably more power to the supermarkets and less to independents because it’s going to be harder.”
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European importers say the health checks are of limited value as they replicate the EU processes that the UK helped create for four decades, and have lived with for the last eight years without any additional processes.
Piotr Liczycki, managing director of Polish haulage firm Eljot International Transport, which specialises in meat imports, estimates his customers will pay around £1m in fees to the UK government this year.
“Nobody can explain what’s the difference between midnight and when the Brexit rules start up. It’s completely the same stuff, from the same factory, with the same quality, nothing has changed,” he told Sky News.
“Polish groups and poultry plants are wondering why the UK government didn’t enforce a solution like we have with Japan, or South Korea. You send us a couple of officials from Defra, they check the plant, do inspection, and say this plant is compliant with all our regulations so we give you permission to send goods for six months or a year.”
Cabinet Office minister Baroness Neville-Rolfe said: “It is essential that we introduce these global, risk-based checks to improve the UK’s biosecurity. We cannot continue with temporary measures which leave the UK open to threats from diseases and could do considerable damage to our livelihoods, our economy and our farming industry.”
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