The UK economy is experiencing its fastest growth since the Second World War and could recover to pre-coronavirus pandemic levels by the end of the year, according to a leading forecaster.
EY Item Club predicted gross domestic product would grow by 7.6 per cent this year, the fastest growth rate since 1941, falling slightly to 6.5 per cent in 2022.
It said their expectations were buoyed by a smaller-than-expected fall in consumer activity after England’s third national shutdown during the first quarter of this year.
The British economy shrank by 9.8 per cent in 2020 – the worst performance in the G7.
While issuing a warning that “there’s more lost ground to make up” than other countries, forecasters said the successful vaccination campaign and large savings accrued over lockdown would give a much-needed boost to the UK economy.
The shortfall in GDP relative to pre-pandemic levels narrowed from 8 per cent in February to a little more than 3 per cent in May.
Growth should continue after the remaining lockdown restrictions were lifted on July 19.
“Now that people are returning to working, shopping and socialising, the UK is well-placed to achieve a strong bounce-back in growth,” EY Item Club’s latest report said.
“UK consumers are particularly big spenders on consumer services, which should magnify the economic boost from life returning to normal.”
It said about £200 billion ($275.2bn) in excess savings was banked by mainly high-income British households during lockdown.
“A return to the typical, pre-pandemic, household saving ratio would be enough to fuel a strong rebound in consumer spending,” the report said.
Despite the positive outlook, forecasters said the economic recovery would not be experienced by all sectors.
It comes amid concern over the number of workers forced to self-isolate after receiving a Covid alert, while the spread of the Delta variant has scientists worried.
“A sufficiently large rise in infections risks seeing restrictions return,” the report said.
Meanwhile, forecasters said the departure of foreign-born workers during the pandemic threatens to weigh on the economy’s capacity to grow.
“Should increased production be required due to higher demands, rising prices and inflationary bottlenecks could occur,” they said.