A delay to the planned lifting of lockdown on June 21 would “materially” hamper UK economic recovery from the pandemic, a major business group has warned.
The British Chambers of Commerce (BCC) said the economy is in a “temporary sweet spot”, but there would be a big threat to the outlook from any Government move to push back the lockdown road map, as well as from rising inflation.
It cautioned this could derail the current rebound, which the BCC predicts will see the UK economy grow by 6.8% this year – the strongest since official records began.
The biggest spending surge since 1988 is set to help the UK economy recover from a 1.5% contraction in the first quarter to grow by 4.1% between April and June as lockdown restrictions lift, according to the group.
Pent-up demand from Britons with savings built up in lockdown is set to see the economy continue growing by 3.5% in the third quarter, before easing back to 1.1% in the final three months.
To find out more about how we can assist you with your Second Charge Mortgage please click here
The squeeze on activity and the damage to confidence from a marked delay to the full lifting of restrictions or further restrictions to combat Covid variants would materially slow the recoverySuren Thiru, BCC head of economics
The BCC said this will be largely driven by a 5.5% rise in consumer spending in 2021 – the strongest for 33 years – while business investment will surge by 4.1%.
But it warned over the risks from inflation and ongoing restrictions.
The economic rebound will also be uneven across sectors and for different people, with the BCC adding that trade will suffer from post-Brexit disruption.
Suren Thiru, head of economics at the BCC, said: “The risks to the outlook are on the downside.
“A more significant surge in inflation would weigh on a consumer-led revival by eroding their spending power.
“The squeeze on activity and the damage to confidence from a marked delay to the full lifting of restrictions or further restrictions to combat Covid variants would materially slow the recovery.”
The BCC forecasts inflation – currently at 1.5% – will jump to a three-year high of 2.6% in the third quarter of 2021, but should ease back to the 2% target in the second quarter of next year.
The BCC also raised worries over youth unemployment, with job prospects for young people set to suffer the most from the pandemic.
While it forecasts the wider rate of unemployment to peak at 6% in 2021 thanks to furlough support, the BCC expects the youth unemployment rate to soar to 15.6% once the scheme ends.
Hannah Essex, co-executive director of the BCC, said: “Young people now entering the workforce and those who lost jobs during the pandemic are at particular risk of longer-term unemployment.
“As the economy emerges from the pandemic, we need to create a dynamic and flexible skills system that meets the needs of local employers and supports individuals looking to return to the jobs market.”
Discover our Second Charge Mortgage Broker services.