The Confederation of British Industry (CBI) estimates the UK economy will return to pre-COVID-19 levels by the end of the year.
The business group believes that the UK is poised to grow by 8.2% in 2021 and 6.1% in 2022, marking an improved picture for the economy than previously expected. Earlier CBI estimates for gross domestic product (GDP) growth over the two years were 6% and 5.2% respectively.
Low business investment
Despite the growth expectations, the CBI believes that business investment will remain 5% below pre-pandemic levels due to the scale of decline caused by the health crisis and ongoing concerns about the long-term impact of COVID-19 on business models.
Household spending is seen as key to the economy’s growth, with the CBI maintaining it will account for just over a quarter of GDP increases in 2021 and 70% in 2022.
The CBI, which is based in Cannon Street, London, also expects unemployment to be lower than first thought, reaching a high of 5.5% in the third quarter of 2021 before falling back to 4.2% by the end of next year.
It puts this down to the UK government’s extension of the Job Retention Scheme into the autumn, and the expectation that the economy is poised for a stronger recovery than earlier predicted.
Positive signs for the economy
Commenting on the economic forecast, 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 the government to come forward with far more detailed plans on everything from decarbonisation to innovation and 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.”