UK economy 'poised for record growth'

The latest economic forecast is predicting the UK will experience the strongest GDP growth this year since records began more than 70 years ago.

Thursday's forecast from the British Chambers of Commerce (BCC) predicted growth in 2021 of 6.8 per cent, although the organisation emphasised this was dependent on the government sticking to its 'roadmap' of fully reopening the post-pandemic economy later this month.If these Covid-19 restrictions continued to be eased, the BCC said growth would be strongest over the second and third quarters of the year, with the economy expected to return to its pre-pandemic level in Q1 of next year.Growth for 2022 is projected to be 5.1 per cent, slightly below the 5.5 per cent predicted by the OECD at the start of June."Consumer spending is expected to be the main driver of this year’s economic rebound. The release of pent-up demand if restrictions ease as currently planned and the rapid vaccine rollout is forecast to drive the strongest growth in spending since 1988, as consumers spend some of their ‘unanticipated’ savings accumulated during lockdowns," said the BCC.Business investment is forecast to be strong both this year and next, although the forecast suggests an uneven recovery, with the hospitality sub-sector projected not to return to pre-pandemic levels until 2023.By contrast, growth in services as a whole are expected to rise by 6.3 per cent this year and by 5.2 per cent in 2022. Even this, however, pales in comparison with the projection for manufacturing, where output growth is forecast at 8.5 per cent this year.The forecast for international trade for this year are not so bright, primarily as a result of an anticipated decline in exports to the Europe "with post-Brexit disruption and the weak near-term outlook for the euro area, expected to weigh on EU demand for UK goods and services".Suren Thiru, head of economics at the BCC, said the forecast pointed to a "historically robust" short-term outlook for the UK economy.He added: “The UK economy is in a temporary sweet spot with the boost from the release of pent-up demand, if restrictions ease as planned, and ongoing government support expected to drive a substantial summer revival in economic activity, underpinned by the rapid vaccine rollout.“Beyond the strong short-term outlook, notable economic scarring from the pandemic is projected to weigh on economic activity once government support winds down and drive an uneven recovery across different sectors and groups of people.“The UK economy is expected to be increasingly unbalanced through the forecast period with a growing dependence on consumer expenditure to drive growth, while net trade is projected to be a drag on the economy. Such economic imbalances leave the UK more exposed to future economic shocks."Hannah Essex, co-executive director the BCC, said the UK economy and the business communities that drive it were demonstrating an ability to bounce back from the pandemic crisis."Historic levels of growth for this year are predicted, a testament to the flexibility and innovation shown by businesses and the resilience of consumers," she said.

Read more news and views from David Sapsted.

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