A steady growth in household incomes and renewed household and government spending will drive the UK’s economic recovery in 2021, but a more cautious revival in business investment means it will be the end of 2022 before gross domestic product (GDP) returns to pre-pandemic levels, according to the Confederation of British Industry’s (CBI) latest economic forecast.
The huge fall in GDP triggered by COVID-19 restrictions in March and April, and a smaller dip over the winter following November’s second lockdown, means that an economic recovery still has some way to go, CBI said on its website.A steady growth in household incomes and renewed household and government spending will drive the UK's economic recovery in 2021, but a more cautious revival in business investment means it will be the end of 2022 before gross domestic product returns to pre-pandemic levels, according to the Confederation of British Industry's latest economic forecast.#
CBI has forecast 6 per cent growth in GDP over 2021, and 5.2 per cent in 2022.
A significant increase in government spending will also play a key role, following announcements since the summer around more spending on tackling the virus. As a result, government consumption will rise by 12.7 per cent in 2021, CBI said.
Business investment will be slower to return, however. A significant downturn ( minus 17.5 per cent) in 2020 will be followed by a further small reduction in 2021 (minus 0.6 per cent), before growing by 9.3 per cent in 2022—a timely return, as government spending will fall again in 2022.
Despite the summer economic rebound, GDP was still 8 per cent below its pre-COVID peak in September. A second lockdown over November means that we expect a 1.7 per cent fall in GDP over the fourth quarter, rounding off a historic decline of 11.1 per cent for 2020 as a whole—the worst year for the UK economy since 1709.
Consumer spending has been at the epicentre of the crisis, and is set to drop by 14.7 per cent in 2020, with leisure activity strongly curtailed and many workers reining in spending due to uncertain employment prospects and hits to incomes.
Unemployment will peak at 7.3 per cent in the second quarter of 2021. By the end of 2022, it will have receded to 4.9 per cent—still short of the pre-pandemic level of 4 per cent.
While projections show business investment recovering, it will do so at a relatively slower pace, falling in 2021 (minus 0.6 per cent) before picking up in 2022 (growing by 9.3 per cent). This is due in part to the sheer scale of decline seen this year, but also indicates ongoing hesitancy around investing in longer-term projects.
Fibre2Fashion News Desk (DS)
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