The UK’s economy will bounce back to pre-COVID levels by the end of 2021 despite the end of lockdown being delayed, the CBI has forecast – a year earlier than expected.

However, the business group has warned of devastation for some still-closed sectors if they are not given more support.

The CBI has upgraded its growth forecast for this year to 8.2%, helped by a spending surge fuelled by improving household incomes and savings built up during lockdowns.

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That will mean GDP bouncing back to its pre-pandemic level by the end of 2021.

The latest report said: “Despite the delay on the lifting of all lockdown restrictions for another month, the UK economy is still set for a breakthrough year.”

It said the economy was poised for “considerable economic growth over the summer” but that “this won’t be felt as strongly by those sectors still working under restrictions”.

Britain suffered its biggest annual economic decline for 300 years in 2020, shrinking by nearly 10% thanks to the pandemic. It took a further hit at the start of this year as fresh lockdowns took their toll.

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The easing of restrictions since the spring has fuelled hopes of a strong bounce back, but there were fears that delaying the planned end of the measures on 21 June could hamper the recovery.

Confirmation of the four-week delay will mean some businesses such as pubs and restaurants must continue to operate at limited capacity, while others such as nightclubs must stay closed.

The government has offered a degree of relief by extending a moratorium on commercial landlords evicting struggling tenants into the new year.

But the Treasury has resisted making any further extension to the furlough scheme and business rates relief, which are both due to start tapering off by the end of this month.

The CBI’s forecast of 8.2% growth this year is an upgrade from its previous prediction of 6%, while it has also hiked its outlook for 2022 from 5.2% to 6.1%.

Like other forecasters, it is also scaling back its fears about the rise in unemployment.

The business group estimates that a significant part of the economy’s rebound this year will come from the government’s spending to tackle COVID-19.

But it cautions that stagnant productivity and business investment will continue to drag on the longer-term outlook.

CBI director general Tony Danker said there were “really positive signs about the economic recovery this year and next” with “pent-up demand and ambition across many sectors”.

But he added: “Clearly this does not apply to the hardest hit sectors from the pandemic who even now face continued delays and genuine challenges to stay viable.

“Extending the commercial rent moratorium will help keep some firms’ heads above water, but the government must also do the same on business rates relief.

“It would be devastating for hospitality, events or aviation businesses to fail on what we hope is the last leg of restrictions.”

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