The International Monetary Fund (IMF) has raised its forecast for UK economic growth, which is set to outpace the eurozone this year after its slump in 2020, but is unlikely to regain its pre-pandemic size until 2022.
The IMF said the economy will grow by 5.3 per cent in 2021, up from a previous forecast of 4.5 per cent it made in January.
Britain has suffered Europe’s highest Covid-19 death toll and its economy shrank by almost 10 per cent last year – the worst performance among the region’s big economies except for Spain.
However, Britain has moved quickly with its vaccine programme, with well over half of the population having had either first or both their jabs.
Meanwhile, the IMF boosted its 2021 global growth estimate to 6 per cent, on the basis of accelerated vaccinations and a flood of government spending.
The IMF forecasts also predicted growth of 4.4 per cent for the eurozone in 2021 with 3.6 per cent for Germany, while France was expected to show a 5.8 per cent expansion.
Both Britain and the eurozone will take longer to recover from the economic hit from coronavirus than the United States or Japan, which are both on track to return to pre-crisis levels of output this year, the IMF said.
The 0.8 percentage-point upgrade for the UK economy was stronger than increases of 0.1 and 0.3 percentage points for Germany and France respectively, but less than a 1.2 percentage-point improvement for struggling Italy.
For 2022, the IMF forecast for British economic growth is 5.1 per cent, which would be the strongest expansion among Europe’s big economies next year.
With the economy picking up, one sector in the UK which has made good progress is Construction.
Its output has grown at the fastest rate in six and a half years as a combination of delayed projects getting the go-ahead and a boost in house-building spurred on the industry.
IHS Markit’s construction Purchasing Managers Index registered 61.7 last month, a sharp increase from a reading of 53.3 in the previous month. The latest reading, which smashed analyst expectations of a score of 54.6, is the strongest rate of construction output growth since September 2014.
House-building led the way with a reading of 64.0, its fastest rate of growth since last July.
But strong increases from commercial construction and civil engineering meant the readings for both segments were their highest since the second half of 2014.
Duncan Brock, group director at the Chartered Institute of Procurement & Supply, described the readings as “spectacular”.
“Construction was full of the joys of spring from March with a sudden leap into solid growth fuelled by across the board rises in workloads in all sectors.
The commercial pipeline was particularly spectacular giving its best performance since late-2014.”
As a result of the upturn, the sector also saw the fastest boost in job creation since December 2018.
Steve Plaskitt, partner at accountants MHA, said that the support for the house-building and construction sectors announced in this spring’s Budget was behind the figures.
He said: “The spring budget was a boon for both house buyers, who stand to benefit from the extension and phased ending of the Stamp Duty holiday, and housebuilders, who will hope that the government’s guaranteed support for 95 per cent mortgages until the end of 2022 will drive demand.”
Plaskitt added: “The government’s infrastructure spending, such as the £27bn earmarked for road-building, is also impressive and will create much-needed stimulus for the industry. Collectively these measures will underpin performance in the sector for the months ahead.” (The writer is our foreign correspondent based in the UK)
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