ALL SYSTEMS GO FOR A SUNNIER OUTLOOK ON THE UK ECONOMY
“It’s all systems go” – that’s how CBI senior economist Martin Sartorius described expectations for the UK economy, going from 2021 into 2022.
Sartorius was speaking on Wednesday [23 June 2021] at the Recruitment & Employment Confederation (REC)’s annual general meeting.
The CBI (Confederation of British Businesses) has revised upwards its forecast for later this year and in the coming year, in terms of both level of output and growth, with only a few cautions around inflation, household savings, continued supply chain issues and adjustments to new trading rules and regulations, Sartorius said.
“It’s kind of ‘all systems go’, which I think is a really good way to describe how we’re looking at the UK economy in 2021, going into 2022,” Sartorius said. “We now expect the UK economy to reach its pre-Covid level of output in the fourth quarter of this year, which is a full year earlier than we previously expected in December. Looking at what this translates into in year-on-year growth terms, we now expect growth of 8.2% in 2021 and 6.1% in 2022. Those are really strong growth figures, especially following that 10% fall in output that we saw over 2020.”
He went on to say: “We expect household spending to really drive the economic recovery, due to a few different factors.”
Higher income households were able to save during the pandemic, a Bank of England survey has shown. Sartorius said: “Meanwhile, lower income employees and unemployed persons have had to kind of draw on their savings, or even potentially borrow to fund day-to-day spending. This is one thing to keep in mind because of the existing evidence pre-pandemic that lower-income households typically have a higher propensity to spend – which means if that kind of trend continues, there may be a little bit of a dampening effect on the impetus from excess savings feeding into economic growth.
“But,” he concluded, “it’s definitely one to watch because we’re in such an un-precedented time.”
Sartorius also noted that in its own research, the CBI is seeing an “upswing” in investment plans.
In terms of the labour market, Sartorius said that the status of 4m workers still on the government’s pandemic furlough scheme veils the numbers of people who will ultimately move back into the labour market, although there is hope that the furloughed workers could “kind of ease some of these skill shortages or labour shortages over the coming months. But that’s still an open question, I think”. However, he added, “we now expect to see a much lower and later peak in unemployment, although there’s still a bit of an uptick as the [furlough scheme] ends… we have it ending 2022 at 4.2%”.
He added: “There’s a lot more to be positive about. We’re really expecting the UK to see a strong rebound. Overall, I think it’s kind of reflecting a little bit of the weather today: although it’s still not great, we do have a bit of a sunnier outlook on the UK economy going forward.”
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