Britain’s economy is unlikely to return to its pre-COVID size until the end of 2022, and unemployment looks set to rise sharply in the first half of next year, the Confederation of British Industry warned on Thursday.
The CBI estimated Britain’s economy would shrink by a record 11.1% this year as a result of the coronavirus, before growing 6.0% next year and 5.2% over the course of 2022.
Unemployment is set to peak at 2.51 million people, or 7.3% of the workforce, in the second quarter of next year after the end of a government furlough programme.
“We simply must find new ways to get businesses investing at the start of 2021 if we are to fast-forward the recovery,” said Tony Danker, the CBI’s new director-general.
The CBI’s growth forecasts are broadly in line with those from the government’s Office for Budget Responsibility last month, which also predicted a slow recovery as Britain faces added challenges when a post-Brexit transition ends on Jan. 1.
The CBI said that even if Prime Minister Boris Johnson agrees a trade deal with the EU to avoid tariffs, the government would have work to do to give clear guidance to businesses, and to ensure border arrangements ran smoothly and that there was temporary flexibility on issues such as EU data rules.
“The government need to demonstrate the same agility and resource allocation as they did with COVID,” Danker said.
A failure to reach a trade deal would leave the economy 1% smaller at the end of two years, even if the government offered some support to soften the blow, and cause further damage over the long term, the CBI estimated.
To boost growth, the government should temporarily subsidise business investment in productivity-boosting technology and scale back business property taxes, the Danker said, describing pent-up demand as a “coiled spring”.
Main Photo: A passenger views Christmas decorations on Regents Street as they ride a bus in London, Britain. Non-essential shops in all parts of England were allowed to reopen when lockdown ended on 02 December 2020 ahead of the Christmas Period. England is a three tier system which will be reviewed on 16th December 2020. EPA-EFE/NEIL HALL