In our Summer forecast for the UK economy GDP grows by 6.8 per cent in 2021, an upward revision of 1.1 percentage points since May’s Spring Outlook, and 5.3 per cent in 2022. The latest data suggest that – while headline growth and business optimism are strong – the recovery is not yet broad-based, being principally driven by the re-opening of a few sectors. Output is expected to return to its pre-Covid level in the first quarter of 2022.
Our central forecast for economic growth in 2021 has been revised up to 5.7 per cent from 3.4 per cent in February. The immediate economic effects of the virus, which have been concentrated in the low-waged service sector, are expected to wane, while remaining negative consequences of Brexit will make themselves felt over the long-run and largely in sectors less affected by Covid-19.
The resurgence of Covid-19 has led to a downward revision in forecasts of UK economic growth in 2021 made by the National Institute of Economic and Social Research (NIESR): from 5.9% to 3.4%, following a contraction of 9.9% in 2020.
Early indications are that the lockdown in the first quarter is having a larger impact on activity than in November, but a smaller impact than the Spring 2020 lockdown.