The UK is set for the strongest growth since the second world war according to the Bank of England.
The Bank has now raised its estimate for UK GDP growth to 7.25% in 2021, up from a previous forecast of 5% this year, as rapid progress with the Covid-19 vaccine boosts overall business confidence.
The upgraded forecast reflects the UK economy’s resilient performance in the lockdown-affected fourth quarter of 2020 and first quarter of 2021, providing a better than expected results for growth. The financial support for the economy announced in the Chancellor’s Budget, the roadmap towards economic reopening, and the continued rapid roll-out of COVID-19 vaccines have also helped to improve growth prospects.
The Bank said it now expected the UK economy to recover to its pre-pandemic level by late 2021 and that unemployment would hit a much lower peak than previously forecast.
In contrast, The U.K. economy contracted 9.9% in 2020 the biggest in over 300 years.
Andrew Bailey, the governor of the Bank of England, said
The recovery was “strong” but likened it to “more of a bounce back” than a boom. The surge in growth, while “good news”, would only return the UK economy back to its 2019 size.
“We're going to see a continued strong recovery this year, but let's put that into perspective.
“That's two years passed with no growth in the economy.”
His comments came as Bank policymakers held interest rates at a record low of 0.1%.