UK economy ‘set to grow at fastest rate on record’
The EY Item Club has upgraded its 2021 growth forecast from 5% to 6.8%, which would mark the fastest rate the fastest rate since official records began. Chief economic advisor Howard Archer said the economy had “proven to be more resilient than seemed possible”.
The vaccine rollout and relaxed restrictions had helped the recovery, it said. The UK’s GDP, which measures all the activity of companies, governments and individuals in the economy, shrank by a record 9.9% last year as coronavirus restrictions hit output, according to the Office for National Statistics.
But EY expects that the UK economy will return to its pre-pandemic size in the second quarter of 2022 – three months earlier than previously forecast. Item Club economists also revised down their unemployment forecasts. The rate is now expected to reach 5.8% towards the end of this year, down from the 7% predicted in January.
Mr Archer said that the latest forecast suggested the economy would “emerge from the pandemic with much less long-term ‘scarring’ than was originally envisaged and looks set for a strong recovery over the rest of the year and beyond”.
He added : “While restrictions have caused disruption, lessons learned over the last 12 months have helped minimise the economic impact.”
Figures released on Monday by Deloitte also suggest that the UK could be on track for a faster economic bounceback than previously thought. Consumer confidence increased at the fastest rate in a decade in the first three months of 2021, according to its survey of 3,000 adults between 19 and 22 March.
Confidence rose by six percentage points to -11%, the Deloitte consumer tracker found.
“Going to a shop” topped the list of leisure activities people are most likely to do after lockdown, with 6 in 10 saying they plan to return within a month of restrictions lifting.
Ian Stewart, chief economist at Deloitte, said: “The UK is primed for a sharp snap back in consumer activity.
“High levels of saving, the successful vaccination rollout and the easing of the lockdown set the stage for a surge in spending over the coming months.”
media captionShopper in Liverpool: “It means life has come back to normal again”
Separate research published last Friday suggested that the recent easing of lockdown measures had triggered a surge in activity among UK firms. A closely watched survey, produced by IHS Markit/CIPS, indicated that the looser restrictions had led to the fastest UK private sector growth since late 2013.
The IHS Markit/CIPS Purchasing Managers’ Index (PMI) rose to 60 in April, according to initial findings, up from 56.4 in March. Any figure above 50 indicates expansion. The service sector grew faster than manufacturing for the first time since the Covid crisis began, the survey found, largely down to the reopening of non-essential shops seen in April.