UK economy predicted to bounce back to near pre-pandemic level

The UK economy is set to return to pre-Covid levels by the end of 2021, a year earlier than expected, the CBI has predicted.

The business group said the economy is expected to grow by 8.2% this year and 6.1% in 2022, while the peak in unemployment will be lower than was previously forecast, the PA News agency reports.

But business investment will remain 5% below levels seen before the pandemic struck.

The economy is poised for "considerable" growth over the coming months despite the delay in ending the lockdown, said the CBI.

Its report pointed to the rapid rollout of vaccines and the "unleashing" of pent-up demand, although the CBI warned that stagnant productivity and business investment remained a problem.

The extension of the Job Retention Scheme into the autumn and expectations of a stronger economic recovery will lead to a lower peak in unemployment, it was predicted.

The rate of growth will outpace all the UK’s major competitors, taking the economy back to pre-pandemic levels of activity by the end of the year, it added, though the bounce-back will follow one of the steepest contractions of any nation during the first months of the pandemic.

A large number of vacancies and some shortages of raw materials and components, especially of computer chips, were likely to persist for several months, hitting some industries, but would probably prove temporary, the CBI said.

Last month the Bank of England raised its estimate for growth in the UK’s national income, or GDP, from 5% to 7.25% in 2022 – the fastest pace since the second world war.