The UK’s economic recovery is progressing “faster than expected” according to a think tank that reported a surge in retail spending.
EY Item Club’s report forecasts economic growth of 16-17% in the three months to September compared with the previous three months, above expectations of 12%.
Despite these figures, the think tank warned that growth isn’t expected to be anywhere near that level in the final quarter. The economy is expected to grow by just 1% in the final three months of the year, it said.
Howard Archer, chief economic adviser EY Item Club, said: “The UK economy has done well to recover faster than expected so far.
“Consumer spending has bounced back strongly, while housing sector activity has also seen a pick-up, in part thanks to the stamp duty holiday.”
The organisation suggested that the end of the furlough scheme will spell high unemployment and sluggish growth.
There is further cause for optimism with the EY Item Club now forecasting the economy to return to pre-pandemic levels in the second half of 2023, having earlier estimated late 2024.
Last week, the Office for National Statistics (ONS) reported that the economy grew 2.1% in August, boosted by the government’s Eat Out to Help Out scheme.
The report said: “The latest forecast also notes that, even if further virus outbreaks are contained and major restrictions on economic activity are avoided, consumers and businesses could remain cautious in their behaviour for an extended period.”
The figures outlined above are based on the government securing a free trade agreement with the EU before the end of the transition period at the end of the year. If that doesn’t happen, the Item Club expects growth to be 1.2 percentage points lower in 2021 at 4.8% and 2.6% in 2022, down from 2.9%.