Britain’s economy will grow at its fastest rate since the Second World War this year as it bounces back from Covid, experts predict today.
National income is set to rise by 8 per cent in 2021 â€“ fuelled by billions in savings that Britons are itching to spend.
And the Brexit deal is expected to further boost the economy in the coming months.
The upbeat forecast comes on the day Britain embarks on a new trading relationship with the EU.
The Centre for Economics and Business Research said the economy would benefit from vaccines, the Brexit deal and Donald Trumpâ€™s departure from the White House.
Deputy chairman Doug McWilliams said Britonsâ€™ love of spending would also help. â€˜Our tendency to splash out once we are let out of lockdown is greater than in many other countries,â€™ he said. â€˜If you give money to Germans or Singaporeans, they will save it, or think about it for a while. Brits will just spend it. The economic recovery will be quicker and stronger than people think.â€™
Signs of optimism have been evident since the Christmas Eve Brexit deal and were bolstered this week by the approval of the Oxford vaccine.The pound ended 2020 on a high, hitting its strongest level of the year against the dollar.
And the FTSE 100 finished the year 23 per cent ahead of its low point in March â€“ although it is still 14 per cent lower than 12 months ago.
The pandemic led to the worst year for blue chip shares since the 2008 financial crisis. But City experts predict 2021 will prove much better for pension savers and small investors.
Michael Hewson, an analyst at CNC Markets, said the FTSE 100 is poised for a â€˜strong reboundâ€™. Jeffrey Halley at Oanda said UK stock markets â€˜should put in a strong performance in 2021â€™ propelled by the recovery.
National debt has soared to more than Â£2trillion due to the pandemic, and a fall in tax revenues. But the CEBR, one of the first to predict the virusâ€™s dire impact, expects a strong revival around the world. It said global output is likely to rise by 5.3 per cent this year, the most since 1976.
But the British economy is set to grow by much more â€“ around 8 per cent. The only years in the 20th century with growth at that level were 1915 â€“ when ramped-up factory production during the First World War helped push it to 8 per cent â€“ 1927, when the economy expanded by the same amount as it recovered from the general strike, 1940 when wartime output soared by 10 per cent and 1941 when it rose by 9 per cent.
Covid-19 is likely to have inflicted an 11 per cent hit on UK national income in 2020, the CEBR said.
Talking about Brexit, Professor McWilliams said: â€˜A lot of industry has sat on its hands and been reluctant to invest, but the confidence to do so should come back now we have a deal.â€™