BOE?S BAILEY WARNS OF RISKS AROUND COVID RECOVERY

Speaking at a Resolution Foundation event yesterday, the Bank of England governor Andrew Bailey said 'the risks around the Covid recovery?are still on the downside? and that there should be a ?note of realism? into the ?growing sense of economic optimism? (The Times, £, p38). Mr Bailey warned that the impact of the coronavirus has destroyed economic capacity and altered demand with the bank predicting scarring of about 1.75 per cent of GDP.

Mr Bailey also indicated renewed concern about a possible rise in inflation as the UK recovers from the pandemic and said that the bank is working on the preparations for negative interest rates if the recovery disappoints (Financial Times (£, p1).

Separately, the Office for Budget Responsibility (OBR) committee member and former Bank of England deputy governor Sir Charlie Bean told MPs on the Commons Treasury Committee that as little as five per cent of the £180 billion in extra savings accumulated by Britons during the pandemic will be spent each year with the bulk being saved (The Guardian, p29). He said to ministers that he does ?not expect households to go out and blow [the spending] all within the next quarter or two? but will be 'spread out over several years?.

HOUSE PRICES TO RISE THIS YEAR, SAY ANALYSTS

Analysts at consultancy firm Capital Economics have revised their original prediction of a four per cent drop in house prices to a three per cent rise this year due to the stamp holiday extension (The Telegraph, £, B2). Capital Economics said the change was in anticipation of a ?quick economic recovery, sustained fiscal support, and the housing-specific measures in the Budget? while predicting that any slump when the stamp duty holiday ends will be less severe than first thought as the mortgage guarantee scheme should help prop up demand.

Meanwhile, estate agency Savills predicts that house prices will rise by four per cent this year, and by 21.1 per cent before the end of 2025, taking the average cost of a UK home to £279,644 (The Guardian, p28). Savills has forecast that homes in north-west England will see the biggest rise in price in the next five years, with prices potentially rising by 28.8 per cent to £227,879 while London house prices will rise by 12.6 per cent to £547,868.

NEWS IN BRIEF

Despite the national lockdown, retail sales in the UK grew one per cent last month compared with the same period last year, according to analysis by the British Retail Consortium and KPMG (Financial Times, £, p2).

The European Banking Authority's (EBA) email servers have been compromised in a global cyber-attack, with initial estimates suggesting some 30,000 US organisations may have been affected (BBC News).

Nearly a quarter (1.3 million) of UK small businesses would collapse if they were forced to deal with the average cost of a cyber-attack, according to a poll, commissioned by Vodafone, of more than 500 business leaders (City AM).

According to the Office for National Statistics (ONS), almost one in eight recent graduates was unemployed in the third quarter of 2020, almost double the average rate for this group over the past three years (Financial Times, £, p2).