CBI forecast

GDP growth to hit pre-Covid levels ‘a year early’

Kier workers

Britain is getting back to work

Britain’s economy is expected to bounce back to its pre-Covid level towards the end of 2021 – a year ahead of a previous CBI forecast.

The employers’ organisation says the economy is poised for a breakthrough year despite the delay on the lifting of all lockdown restrictions.

It admits that growth won’t be felt as strongly by those sectors still working under restrictions and says stagnant productivity and business investment remain a drag on the longer-term sustainability of economic growth. 

Even so, the CBI is forecasting GDP growth of 8.2% this year, and 6.1% in 2022 (revised up from 6.0% and 5.2% in its previous forecast), following a historically large (-9.9%) fall in output over 2020. 

Household spending is the linchpin of this recovery, driving just over a quarter of GDP growth in 2021, and 70% of growth in 2022. Consumer spending is bolstered by an improvement in real incomes, and households running down some of the excess savings built up over the last year.  

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The CBI now also expects a much lower peak in the unemployment rate (5.5% in Q3) than in December (7.3% in Q2 2021).

This is in part due to the extension of the Job Retention Scheme into the autumn, the resilience of the labour market so far, and expectations of a much stronger economic recovery. 

A temporary boost to government spending on tackling the virus is another significant contributor to growth this year, driving around half of the rise in GDP over 2021. 

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