Vaccine boost means economy will grow twice as fast as eurozone, says CBI

Britain's GDP set to grow by 8.2pc this year, beating the eurozone’s 4.2pc and even the 7.5pc forecast for the US

Source - Daily Telegraph - 18/06/21

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The UK’s economy will race ahead of its European rivals this year and in 2022 thanks to the success of the vaccination programme, according to the Confederation of British Industry.

GDP will grow by 8.2pc this year, the CBI predicts, beating the eurozone’s 4.2pc, which ranges from Spain’s 5.6pc to Germany's 3.4pc.

It also puts the UK ahead of the US, which is set to expand by 7.5pc in 2021.

Such a strong year means Britain's economy will recover to its pre-Covid size this year, according to economist Alpesh Paleja - a year ahead of the CBI’s previous forecasts.

“We have substantially upgraded our forecasts for UK growth - it is a testament to the success of the vaccine rollout,” he said.

“We see much stronger growth in the UK than in the major eurozone economies. They also do recover over the course of this year and next, but the UK is very much ahead. A lot of it comes down to the improvement in health outcomes.”

Strong growth will continue into 2022. The UK will expand by 6.1pc next year, faster than the US, France, Germany and the eurozone as a whole.

However even as consumer spending will drive the recovery, growth could ultimately slow back to its pre-Covid path - returning to the underwhelming era of weak productivity seen after the financial crisis.

Business investment is recovering strongly but will still be 5pc below its pre-Covid level this year, Mr Paleja warned, undermining future growth.

“There is still lingering uncertainty over the longer-term changes to the economy that might arise from Covid - what does it mean for ways of working, for shifts in business models,” he said.

“Consumer-facing companies might be waiting to see whether the shifts in spending patterns persist and what it means for restructuring business operations.”

Even the investment super-deduction is only helping to bring spending forwards, rather than boost capital expenditure overall, with factories benefitting the most but services businesses often struggling to make use of the tax incentive.

“It shifts the timing of investment, rather than putting it onto a structurally higher footing,” Mr Paleja added.