As the government continues to put forward an extremely cautious narrative about re-opening, more evidence emerged today that the economy is surging ahead. The International Monetary Fund has once again upgraded its forecast for Britain’s growth this year: its April prediction of 5.3 per cent growth in 2021 has now been revised upward to 7 per cent. If correct, the UK could boast one of the fastest growing economies amongst major countries, with a recovery looking to be on par with the United States.
Today’s update from the IMF fits a trend. Just this weekend the EY Item Club forecast 7.6 per cent growth this year – the fastest rate of growth in Britain for 80 years. These forecasts join a list of increasingly optimistic predictions for economic recovery, which include heavy hitters like the Bank of England as well.
So what could derail Britain’s economic recovery? In short, plenty: inflation is a growing concern, as monthly updates continue to overshoot consensus. Fears of future lockdowns – or at least reimposed restrictions on business activity – are another. As I say in the Daily Telegraph today, rapid recovery is still not guaranteed. There are still plenty of hurdles to overcome – including labour shortages due to Covid and Brexit, as well as the infamous ‘pingdemic’ that is threatening to put millions of people back into self-isolation in the coming weeks. And that’s all before you get to the government’s negative narrative around reopening.
Whitehall’s confidence problem – which saw 19 July treated more like doomsday than ‘freedom day’ – does little to inspire business confidence. Nor do whispers of autumn crackdowns, which have been mentioned by ministers and senior officials within the past few weeks.