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UK Economy Expected to Grow at Fastest Rate on Record

New forecasts for the UK’s economy in 2021 predict the highest growth rates seen since the second world war.

Posted: 26th April 2021 by
Finance Monthly
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The UK economy is predicted to grow at the fastest rate since the second world war this year, according to a widely cited economic forecaster.

The EY Item Club has upgraded its forecast for GDP growth during 2021 from 5% to 6.8%, which would mark the fastest annual growth since 1941. This comes in the wake of relaxing COVID-19 restrictions and optimism that rapid progress with the country’s vaccine programme will enable a swift return to business as usual.

Consumer confidence also increased at the fastest rate in a decade during the first quarter of 2021 on this vaccine-driven optimism. The EY Item Club added that the improved short-term outlook means that the UK economy is expected to return to its pre-pandemic peak by the middle of next year, aided by a surge in consumer spending as households saved during lockdown.

Elsewhere, analysts at Goldman Sachs have predicted a growth rate of 7.8%, stronger than that expected for the US, where President Biden is spurring economic recovery with a multi-trillion-dollar stimulus initiative.

Further pieces of data have added to observer optimism for the UK economy. Item Club analysts revised down their unemployment forecasts from 7% to 5.8% by the end of the year, and the HIS Markit/CIPS Purchasing Managers’ Index found that the service sector grew faster than manufacturing in April for the first time since the pandemic began.

"The UK is primed for a sharp snap back in consumer activity,” said Ian Stewart, chief economist at Deloitte.

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"High levels of saving, the successful vaccination rollout and the easing of the lockdown set the stage for a surge in spending over the coming months."

The UK economy shrank by 9.9% in 2020, the worst performance among the G7 and the steepest annual decline seen in the country since records began.

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