A delay in lifting lockdown restrictions would “substantially” hinder the country’s economic recovery this year, the head of the UK Chambers of Commerce claims.
If the remaining restrictions in England are lifted on June 21, the UK economy is expected to grow nearly 7 percent this year, which would be the fastest pace since records began in 1949, according to the BCC.
The growth would primarily be supported by an upturn in private consumer spending, which is likely to rise by 5.5 percent this year, which is the highest level since 1988.
However, growth projections would have to be revised if the government decides to postpone reopening the entire economy later this month, the BCC added.
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On June 14th, the government is expected to announce whether or not all restrictions in England will be lifted by June 21st as planned in the current lockdown roadmap.
Some experts and ministers urge caution as the number of people infected with the Delta or Indian variant of the coronavirus continues to increase.
Britain’s GDP declined 10 percent last year, with production falling 9.1 percent, the largest annual decline on record.
When the economy stalled, the Bank of England cut interest rates to 0.1 percent. The BCC now assumes that interest rates will not rise to 0.25 percent until the second quarter of 2023.
Suren Thiru, Head of Economics at the BCC, said: ‘Our latest outlook points to a historically robust short-term outlook for the UK economy.
“The UK economy is in a temporary sweet spot as pent-up demand spikes when restrictions ease as planned and continued government support, which is expected to spur significant economic activity over the summer, aided by the rapid introduction of Vaccines.
Impact: The pandemic severely affected the UK’s economic performance over the past year
“Aside from the strong short-term outlook, it is expected that remarkable economic scars from the pandemic will weigh on economic activity once government support wanes and spurs uneven recovery across sectors and groups of people.”
Thiru believes the economy will “become increasingly unbalanced” over the next year or so, with experts pinning their hopes on consumer spending spurting growth while trade levels stall.
He added: ‘Because of these economic imbalances, the UK is more exposed to future economic shocks.
‘The risks to the outlook are on the downside. A stronger surge in inflation would weigh on a consumer-led revival by eroding their purchasing power.
“The pressure to act and the fidelity caused by a significant delay in the complete lifting of restrictions or further restrictions on combating Covid-19 variants would slow the recovery significantly.”
The number of goods exported from Great Britain to the European Union is expected to fall by 12 percent this year, by 1.4 percent next year and by 2.5 percent in 2023.
The BCC said, “Trade is expected to make a negative contribution over the forecast period.
“This largely reflects an expected decline in exports to the EU, with interruptions after Brexit, and the weak near-term outlook for the Eurozone, which is expected to weigh on EU demand for UK goods and services.”
Amid the current lockdown easing plans, the BCC has forecast that quarterly growth will be strongest in the second and third quarters of this year, with the macroeconomic picture returning to pre-pandemic levels early next year.
In short: The Bank of England cut interest rates to 0.1% last year
Forecast: The BCC believes the BoE will not raise rates until 2023
According to the data, the economy is expected to grow 5.1 percent in 2022.
Unemployment in the UK is expected to remain at “much lower levels” than in recent recessions, the BCC said. It is expected to peak at 6 percent and youth unemployment at 15.6 percent by the end of the year after the vacation regime expires.
New figures from the Office of National Statistics show that around 1.7 million people are still on vacation across the country.
The BCC expects corporate investment to rebound strongly this year and 2022, supported by the expected boost from the reopening of the economy and the introduction of the super-withdrawal incentive.
However, business investment is expected to slow sharply in 2023 as the super-deduction incentive ends and corporate tax increases.
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