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UK economy will revive in 2021 but full recovery not likely until 2022, says CBI


Britain’s economy will bounce back next year from the Covid pandemic but a fifth year of weak business investment will delay a full recovery until the end of 2022, according to CBI forecasts.

A combination of Brexit uncertainty, which is expected to continue into next year with or without a deal, and the blow to business confidence during the first and second lockdowns will delay a rebound in private sector investment.

Business investment has remained flat since the 2016 Brexit vote as companies struggled to assess the impact of Brexit while negotiations continued.

With No 10 and EU officials locked in talks this week and a conclusion not expected to be reached until nearer the transition end date on 31 December, business groups including the CBI have said they fear uncertainty could deter investment in the new year.

The CBI said it was optimistic that the vaccine was an important element in the recovery and would allow household incomes and spending to be a catalyst for revival from mid-2021 onwards, “as the prevalence of the Covid-19 fades, a pandemic-related spike in unemployment eases and earnings recover”.

With the vaccine taking effect by the summer, consumer spending and Whitehall support programmes will be the main drivers pushing the economy back to its previous peak.

The business lobby group said a 6% rate of growth in GDP over 2021 would slip back to 5.2% in 2022, after the planned withdrawal of the government’s most generous pandemic support programmes.


However, the second lockdown in England over November and much of the country adopting tight restrictions under the government’s tiered system, which would lead to a third quarter of negative growth, meant the UK was starting from a lower position than expected in the summer, the business lobby group said.

A 1.7% fall in GDP in the fourth quarter will lead to a total contraction of 11.1% over 2020 – confirming that 2020 has been the worst year for the UK economy since 1709.

The CBI director-general, Tony Danker, who took over from Carolyn Fairbairn last month, said Covid-19 had left “deep scars on the economy” and the “road to recovery will be long … But the trajectory is positive, and we must do all we can to hasten the journey.”

Danker added: “We simply must find new ways to get businesses investing at the start of 2021 if we are to fast-forward the recovery. We have had great news on vaccines this week, but if we are to be masters of our own destiny, we must act decisively to rebuild a better economy.

“British business is like a coiled spring ready to release ambition and investment. They just need a chance.”

Business investment, which dived by 17.5% in 2020, would be followed by a further small reduction in 2021 of -0.6% before growing by 9.3% in 2022, the CBI report said.



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