UK economy won't return to pre-Covid levels until around mid-2022, warn experts

The economy will be back to its pre-Covid level around the middle of next year, according to economists.

In a poll for Reuters experts said unemployment would peak at 6.2 per cent as 2021 draws to a close and the pandemic job support scheme ends.

Last year the economy shrank by the most in more than three centuries, but the April 7-12 poll of around 70 economists said it would expand 5 per cent this year and 5.5 per cent in 2022.

In a March poll those forecasts were 4.6 per cent and 5.7 per cent, respectively.

The UK has suffered the highest coronavirus-related death toll in Europe.

But a swift vaccine rollout and plummeting infections has allowed the government to begin easing restrictions and on Monday non-essential retail and outside hospitality reopened.

Monday saw a raft of measures lifted and businesses back open (Jonathan Hipkiss/Birmingham Mail)

When much of the UK's service industry was shut, and with people encouraged to stay at home, the poll had suggested the economy contracted 2.3 per cent last quarter.

Now that lockdowns are being loosened, it was expected to grow 3.5 per cent this quarter and 3.0 per cent in the next.

“There are mounting signs that the effects on the economy from the third COVID-19 lockdown have started to thaw,” said Paul Dales at Capital Economics.

“We are sticking to our relatively optimistic view that the reopening of the economy and the vaccine programme will allow GDP to regain its pre-pandemic level early next year.”

But asked when the British economy would be back to its pre-pandemic size the majority of respondents to an additional question thought it would take a bit longer, with 10 expecting it to be a quarter or two later.

Chancellor Rishi Sunak said last month he expected the economy would return to its pre-pandemic size in mid-2022. Six respondents in the poll said it would take longer and five said it would be sooner.

Britain’s job market has been boosted by the furlough scheme which is due to run until September.

“Some rise in unemployment is probable once furlough ends. But the evidence from around the world is that labour markets can recover quickly and if scarring is contained, jobs growth can recover through 2022,” said Brian Martin at ANZ.