The rapid rate of vaccinations will help the economy recover faster than expected as consumers splash out on the billions of pounds of savings they have stashed away.
In a hope car sales will be boosted by consumers spending the money they have saved during lockdown, official forecasts show the economy will recover to pre-crisis level by the middle of next year.
Savers have tucked away as much as £125bn during the last year and experts predict as much as £6bn of that could be spent as the economy reopens after lockdown.
The Office for Budget Responsibility (OBR) forecasts also predict that the unemployment rate will peak at 6.5 per cent now, not the 7.5 per cent it had previously said in November.
Yesterday, car dealers Robert Forrester of Vertu Motors and Daksh Gupta of Marshall Motor Group both said they think car sales will jump when showrooms reopen in a special Car Dealer Live interview.
Forrester said a lot of people have saved cash and are ‘desperate to spend it’ and while the industry saw some of that last year, he thinks ‘it will be here in spades’ when dealers reopen.
The official OBR forecasts certainly suggest there will be a more rapid recovery.
It has hiked its outlook for gross domestic product (GDP) – a measure of the size of the economy – for 2022 to 7.3 per cent from 6.6 per cent previously.
While it upped the outlook for next year, the OBR has cut its forecast for every other year until 2025, including a cut for this year to four per cent from the 5.5 per cent growth previously pencilled in.
This follows the biggest plunge in the UK economy for more than 300 years in 2020, with GDP tumbling 10 per cent.
However, the OBR did caution that the GDP outlook could get worse if the vaccination programme suffers any setbacks or if there are further lockdowns.
Its forecasts also reveal a hit to GDP of 0.5 per cent from Brexit disruption in the first quarter, with export of UK goods and supply chains impacted by border delays.
Combined with the third national lockdown in England, this will see GDP drop 3.8 per cent in the first quarter before bouncing back by 3.9 per cent in the following three months.
Richard Hughes, chairman of the OBR, said: ‘Two things that are different now compared to our forecasts back in November, about the environment for business investment.
‘One is that there’s much more certainty about the effectiveness of vaccines, as well as the timetable for that rollout, which I think provides more confidence than we had back in November, about the sustainability and pace of the recovery.
‘And the second thing is that when we were doing our November forecasts, we didn’t know the final outcome of the Brexit negotiations or indeed whether there’s going to be any deal at all.
‘And it has certainly been a case of, since the referendum, one of the things which we think has been suppressing business investment has been uncertainty about the nature of our future relationship with the EU.
‘That is now more certain as regards trade and goods, I think there remains some uncertainty about the nature of our future trading relationship on services.’
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