A fresh round of vaccine optimism underpinned another strong week for global equities with benchmarks hitting fresh new highs, including the Dow Jones Industrial Average crossing the 30,000 points threshold. The UK has secured another 7 million doses of the Moderna vaccine, which takes the total to 357 million doses of vaccines across 7 different providers. This is the equivalent of providing enough vaccine for 3.5 million people.
As the UK is set to phase out of its month-long lockdown, new tiers have been established which see much of the UK either remain or fall into tighter restrictions as we head into the festive period. Most of the North has been placed in tier three with London being in tier two.
Meanwhile, Chancellor Rishi Sunak presented the country’s latest spending forecasts with underlying debt set to rise to 109% of gross domestic product (GDP). The net debt as a percentage of GDP of the UK government was 83.9% in January 2020; however, given the public outcry for business loan support and the furlough scheme, this value has peaked to 100.8%. Sunak foresees a rise in the unemployment rate to 7.5% and a forecasted yearly GDP growth of -11.3% for 2020. In 2008, the unemployment rate spiked to 8% of the working population and currently sits at 4.8%. This figure is masked by the furlough scheme that came into effect in March, which has supported workers’ incomes as business functionality grinded to a halt.
Sunak also suggested that house prices would fall in 2021 and 2022 as income support schemes and the stamp duty holiday would be pared back. Housing activity has surged in recent months as buyers seek to profit from the stamp duty holiday which is set to finish at the end of March 2021. The average asking price has increased by 5.5% compared to a year ago with the number of sales rising by 70%. This has been fuelled by a greater savings rate as a large proportion of the workforce has shifted to working from home, benefiting financially from reduced commuting costs. Inner London house prices fell per the House Price Index data, however outer London prices grew. Pre-pandemic, a house could be purchased using a 5% deposit. However, this has surged to at least 10% as mortgage lenders are wanting more assurances, given the surge in demand and inherent risk.
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