The UK financial system could have grown by as a lot as 17% within the three months to the tip of September, says the EY Merchandise Membership, however slower development could comply with.
Customers splurged throughout the interval as coronavirus lockdown restrictions have been lifted, it mentioned.
It’s a rosier imaginative and prescient than the one provided by Merchandise Membership economists in the summertime, however they warned that development for the remainder of 2020 can be far slower.
Development for the ultimate three months will likely be 1% or much less, they predicted.
“The UK financial system has accomplished nicely to recuperate quicker than anticipated thus far,” mentioned Howard Archer, chief financial adviser to the EY Merchandise Membership.
“Shopper spending has bounced again strongly, whereas housing sector exercise has additionally seen a pick-up, partly because of the stamp responsibility vacation.”
The financial system most likely grew 16-17% within the third quarter of the yr in contrast with the second quarter, it mentioned. It had been anticipating development of 12%.
Commerce deal danger
Whereas authorities assist such because the furlough programme has supplied “much-needed help”, development will now start to fade, mentioned Mr Archer.
The tip of the furlough scheme, below which staff had a part of their wage paid by the federal government, will imply increased unemployment and sluggish development, mentioned the forecasters, who use an analogous financial mannequin to the Treasury.
That mentioned, the UK financial system is now predicted to regain its pre-pandemic dimension within the second half of 2023. Again in July, the EY Merchandise Membership didn’t count on that to occur till late 2024.
Official figures from the Workplace for Nationwide Statistics confirmed final week that The UK financial system continued its restoration in August, rising by 2.1% within the month, because the Eat Out to Assist Out scheme boosted eating places.
It was, nevertheless, smaller than economists had estimated and helped drag down the estimated tempo of restoration for the yr.
As with all financial forecast, there are elements which might pace up or decelerate the restoration, the economists mentioned.
A vaccine is probably going to assist the financial system, however there are extra possible threats to development than there are shock boosts.
Elements that would overwhelm development embody a drop in shopper spending, extra lockdown measures, sluggish Brexit negotiations between the UK and the EU and a spike in unemployment.
“The newest forecast additionally notes that, even when additional virus outbreaks are contained and main restrictions on financial exercise are prevented, customers and companies might stay cautious of their behaviour for an prolonged interval,” the report mentioned.
The Membership’s estimates assume a easy free commerce settlement with the EU by the tip of the yr.
With out an settlement, development of 4.8% is forecast in 2021, down from 6%, whereas development in 2022 can be reduce to 2.6% from 2.9%.