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Recovery ‘to take longer for regions’ and will create inequality for years

Covid restrictions

Britain’s economy will recover rapidly from the Covid-19 crisis but risks being hit by rising regional inequality and destitution for years to come, a leading think tank has warned.

The National Institute of Economic and Social Research yesterday upgraded its growth forecast for the year to 5.7 per cent. This was up from a previous forecast of 3.4 per cent but below the Bank of England’s latest projection of 7.25 per cent.

NIESR said rising coronavirus infection rates abroad, including in India, would weigh on the domestic economy.

Jagjit Chadha, institute director, said: “It affects our income, through our trade with the rest of the world and also to the extent to which travel restrictions will bear down on the UK economy, because we rely a lot more on tourism, recreation and social consumption. These will tend to limit growth this year.”

NIESR was founded in 1938 and is Britain’s oldest independent economic research institute. It uses the same forecasting model as the Treasury and the International Monetary Fund.

It said that the UK economy would only return to its pre-pandemic size in the final quarter of 2022, which is later than the Bank of England’s forecast for the final quarter of this year.

Adrian Pabst, a NIESR economist, said: “The long-term effects of Covid and Brexit mean that we do not project any strong levelling-up. Rather [the outlook] is one of London and the southeast doing relatively well and other parts of the country struggling.”

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Recovery ‘to take longer for regions’ and will create inequality for years

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