The UK’s economy will grow at its fastest rate since the Second World War this year as it bounces back from Covid, experts predict.
The nation’s GDP has taken a bigger hit than average from Covid-19, but the Centre for Economics and Business Research (CEBR) says Britons’ love of spending will help it recover.
The group believe national income could rise by 8% in 2021, fuelled by the money people are itching to spend once restrictions are lifted.
Although many people have fallen on hard times, the CEBR said £200 billion has been saved by Brits during the pandemic, which could lead to the biggest growth in GDP since 1941.
Deputy chairman Doug McWilliams told Mailonline: ‘Our tendency to splash out once we are let out of lockdown is greater than in many other countries.
‘If you give money to Germans or Singaporeans, they will save it, or think about it for a while. Brits will just spend it. The economic recovery will be quicker and stronger than people think.’
The Bank of England’s chief economist, Andy Haldane, made a similar prediction earlier this month, when Brits flocked to shops on the UK’s high street after the second lockdown was lifted.
Although millions of people lost their jobs or took hits to their incomes due to the pandemic, he said there remains a vast pile of cash waiting to be spent by the army of ‘accidental savers’ who financially gained from working from home and going out less.
He said a nationwide spending spree could help the economy to recover more quickly than forecasters have predicted, with many Brits already showing their willingness to splash the cash.
‘People are using their involuntarily-accumulated savings on a new house or a new car,’ Mr Haldane told Mailonline. ‘[But] plenty of that pent-up demand is still in the tank… there are plenty of those savings still to be used.’
The CEBR said that the world economy will recover at its fastest rate since 1976, with tourism, hospitality, tech and pharma ‘to come roaring back in the second half of the year’.
The upbeat prediction comes as millions of Brits welcome the new year in lockdown.
Scientists have warned restrictions may last months as the second wave threatens to overwhelm hospitals across the country.
Despite this, the CEBR said the economy would benefit from vaccines, the Brexit deal and Donald Trump’s departure from the White House.
There are already small signs of optimism, with the pound hitting its strongest level of the year against the dollar on the final day of 2020.
The FTSE 100 finished the year 2% ahead of its low point in March – although it is still 14% lower than 12 months ago.
Financial analysts say the FTSE is poised for a ‘strong rebound’ with the roll-out of Covid-19 vaccines spurring an economic recovery.
But while the UK economy is expected to revive in 2021, the depth of the Covid recession means it is unlikely to return to its pre-pandemic peak until late 2022.
National debt has soared to more than £2 trillion due to the crisis, and the Office for Budget Responsibility (OBR) predicts unemployment will spiral next year when the furlough scheme ends.
Although the Brexit deal might restore investors’confidence, disruption is expected while companies get used to the new rules. The OBR estimates a long-term loss of output of about 4% compared with remaining in the EU.
Chancellor Rishi Sunak admitted in November that the ‘economic emergency’ had only just begun, as official forecasts predicted the biggest economic decline in 300 years.
It is thought that tax rises or spending cuts will be needed in future years to stabilise the UK’s growing debt pile.
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