Despite Omicron and the squeeze on household spending, EY ITEM Club predicts that the UK remains set for robust growth.
In brief, the EY ITEM Club predicts GDP growth of 4.9% for the UK in 2022, down from its Autumn forecast of 5.6% – and well below the 7.3% now estimated for 2021.
The slower growth reflects the impacts of Omicron, rising inflation and financial challenges for households – including increased energy prices and NICs.
From mid-2022 activity should strengthen due to declining concerns over the pandemic, a buoyant jobs market and household savings built up in lockdowns.
The economic drag from Omicron at the start of this year and the squeeze on households’ spending from higher inflation have caused the EY ITEM Club to downgrade its projection for UK GDP growth in 2022, to 4.9% from 5.6% in their November forecast. But this forecast remains higher than the consensus in the market, reflecting their view that the economy will still benefit from some powerful tailwinds. These include a buoyant jobs market, a rebound in business investment, and – probably most important of all – an uptick in sentiment as fears of COVID-19 fade.
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