UK growth will be slower despite upturn in Q3
Consumer spending helped the economy to pick up (pic: Terry Murden)
The UK economy’s initial recovery from recession has been much faster than expected, according to the EY ITEM Club’s Autumn Forecast, but growth prospects have been downgraded.
In its latest forecast, the EY ITEM Club says GDP likely grew around 16-17% in Q3 compared to the previous quarter– much faster than the 12% growth predicted in July’s Summer Forecast.
But growth of 1% or less is expected in Q4, while the growth forecast for 2021 has been lowered from 6.5% to 6.0%.
After Q3’s boost, the EY ITEM Club now expects the economy to contract 10.1% in 2020, an improvement from the 11.5% contraction forecast in the Summer.
The strong Q3 performance was driven by consumer spending and the release of pent-up demand as COVID-19 restrictions were relaxed.
The UK economy is now predicted to regain its pre-pandemic size in the second half of 2023, compared to Spring’s forecast of Q1 2023 and Summer’s late-2024 forecast.
The research and Item Club’s forecasts came ahead of the Chancellor’s further job support measures announced on Friday.