The Confederation of British Industry (CBI) has predicted the UK economy will return to pre-Covid levels and over 8% annual growth by the end of 2021 in its latest Economic Forecast.
Despite the delay in fully lifting lockdown restrictions, the CBI expect the UK’s output to grow 8.2% in 2021, and 6.1% in 2022, as it recovers from the impact of the coronavirus pandemic; however, the organisation representing over 190,000 UK businesses acknowledges that growth will be less strong in sectors still under restrictions. The UK’s GDP fell by 9.9% over 2020.
The CBI expect growth to be driven by household spending due to a combined improvement in real incomes and the spending of excess savings made during the pandemic in 2020. Unemployment also has not reached the levels predicted, in part due to government support such as the furlough scheme. A temporary boost to government spending on tackling the virus is noted as another significant contributor to growth this year, driving around half of the rise in GDP over 2021.
However, the CBI also warn that the UK economy remains hampered by issues that existed before the pandemic, such as stagnant productivity and business investment, which is expected to remain 5% below pre-pandemic figures.
CBI Director-General, Tony Danker, said:
There are really positive signs about the economic recovery ahead this year and next. The data clearly indicates that there is pent up demand and ambition across many sectors.
“The imperative now must be to seize the moment to channel this investment into the big drivers of long-term UK prosperity. That’s why it’s the right time for Government to come forward with far more detailed plans on everything from decarbonisation, to innovation to levelling up.
“Clearly this does not apply to the hardest hit sectors from the pandemic who even now face continued delays and genuine challenges to stay viable. Extending the commercial rent moratorium will help keep some firms’ heads above water, but the Government must also do the same on business rates relief.
“It would be devastating for hospitality, events or aviation businesses to fail on what we hope is the last leg of restrictions.”