The Confederation of British Industry (CBI) has predicted that GDP will bounce back to pre-Covid levels with a growth of 8.2% this year, and a 6.1% increase in 2022.
According to the group’s latest Economic Forecast, it 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.
The forecast also revealed that business investment is also set to “claw back” some of its losses, “spurred on” by strong economic growth and rising confidence, and reinforced by the super-deduction announced in March’s Budget.
However, business investment nonetheless will remain 5% below its pre-Covid level at the end of 2022, reflecting both the scale of the decline seen over the crisis, and lingering uncertainty over the longer-term impact of Covid-19 on business models.
Tony Danker, director-general, CBI, said: “The data clearly indicates that there is pent up demand and ambition across many sectors.
“The imperative now must be to seize the moment to channel this investment into the big drivers of long-term UK prosperity. Clearly this does not apply to the hardest hit sectors from the pandemic who even now face continued delays and genuine challenges to stay viable.”
He added: “Extending the commercial rent moratorium will help keep some firms’ heads above water, but the government must also do the same on business rates relief. It would be devastating for hospitality, events or aviation businesses to fail on what we hope is the last leg of restrictions.”