Tax Hikes, Population Decline Threaten UK Economic Rebound

UK retail sales were little changed in December after an anticipated rebound failed to materialise and government borrowing surged ahead of the festive holidays in what economists say should be taken by Chancellor Rishi Sunak as a warning against any tax rises in the March budget. 

The UK's economy contracted by 2.6% during November 2020, a decline that will not be surprising given the UK economy was subject to a second national lockdown owing to rising covid-19 cases.

UK inflation rose again in December and surpassed the expectations of market participants, but the rises are not yet significant enough to suggest there is any reason for the Bank of England to shift course on interest rates or other monetary policy settings.

It is expected that the merger of CaixaBank and Bankia will be formalised by March 2021, a development that could bring with it some difficulties for those international and expat buyers looking to take out a Spanish mortgage.

The UK economy could be on course to recover all of its coronavirus-inspired losses as early as next year, according to forecasts from Capital Economics, although only so long as HM Treasury doesn't opt to snatch defeat from the jaws of victory at the March budget. 

The Bank of England Governor Andrew Bailey told MPs it was reasonable to assume the EU and UK could reach a deal on financial services by the end of March.