Andrew Bailey says an uneven economic recovery has begun
Bank of England governor Andrew Bailey has said the UK economy is starting to recover from April’s lockdown, although he stressed that the rebound had been uneven so far.
Bailey said activity was resuming “quite strongly” in the housing and car markets. But he said the hospitality and entertainment sectors were still struggling.
His comments came a few days after data showed that the UK economy grew by just 1.8 per cent in May after plunging 20.3 per cent in April. Economists had been expecting growth of 5.5 per cent.
Bailey’s fellow Bank of England policymaker Silvana Tenreyro this week said the UK economy will likely go through an “interrupted or incomplete” V-shaped recovery. as unemployment and social distancing weigh on growth.
During a webinar today, Bailey said: “We are seeing activity return. We are beginning to see this recovery.”
He said there was a “very big question” about whether people would return to their pre-coronavirus habits and spending patterns.
Asked whether the UK economy would see a V-shaped recovery, he said: “We don’t yet know the full story of this.”
A V-shaped recovery would see GDP bounce back almost as sharply as it fell off in March and April. The economy would return to its pre-coronavirus size relatively quickly.
However, earlier this week the UK’s budget watchdog said the economy was likely to shrink 12.4 per cent this year and grow 8.7 per cent the next. It said GDP would recover its pre-coronavirus size at the end of 2022.
Economists have said such a recovery would look like a square-root sign on a graph. It would show activity bouncing back relatively fast but never recovering its pre-coronavirus trend.
Bailey said the Bank of England did not know how damaging company failures would be to the UK economy.