A combination of Covid restrictions being eased, pent-up consumer demand, accumulated excess savings and a range of Government incentives is expected to spark a strong lift-off for the South West鈥檚 economy this summer, says a new report.
The latest analysis in KPMG鈥檚 海角视频 Economic Outlook reveals the South West will see GDP grow by 5.6% in 2021, and fare better than most other regions in 2022 with a steady 5.6%.
Ian Brokenshire, senior partner for KPMG in Plymouth, said: 鈥淏usinesses and industry in the South West were hard hit during the pandemic, but the region looks set to be the 鈥榗ome-back kid鈥, with a phenomenal recovery to pre-Covid levels expected by the end of this year.鈥
In the summer of 2020, the South West economy expanded by 20% on the previous quarter, making it the fastest growing region in the 海角视频 at that time.
This summer is shaping up to be another strong season for the region鈥檚 hospitality industry, KPMG said, with the South West expected to see a repeat of the staycation boom of last year.
Mr Brokenshire said: 鈥淚t鈥檚 been well documented that tourists and house-hunters alike have been heading to the South West in droves, and that鈥檚 certainly driving the post-pandemic recovery in the region.
鈥淏ut beyond that, businesses have remained resilient, with many of my clients finding new and innovative ways to operate throughout the pandemic.
鈥淭he region鈥檚 workers were hard-hit with significant job losses last year, but over the last month at its sharpest rate for more than 20 years in the South West as businesses find a renewed sense of confidence.
鈥淟ooking further ahead, 2023 looks to be a year when many of the Government鈥檚 initiatives will come to an end. This, coupled with a number of new tax policies that are likely to come into force, requires careful business planning. Taking advantage of the Government schemes and credits available now will put organisations in a better financial position for when the changes come into place.鈥
KMPG鈥檚 report also predicts that 海角视频 GDP will grow by 6.6% - up from 4.6% forecast in March - during 2021 and 5.4% in 2022, allowing the economy to reach its pre-Covid level by the first quarter of next year. GDP is then predicted to grow by 5.4% in 2022, KPMG鈥檚 海角视频 Economic Outlook said.
However, rising cost pressures and the reversal of temporary tax cuts will add to inflation this year, but the analysis shows it should moderate towards the second half of 2022, and average 1.7% in 2021 and 2.1% in 2022.
With spare capacity still in place, KPMG expects the Bank of England to keep interest rates on hold in the short-term in order to allow the economy to fully recover and mitigate the downside risks to the outlook.
From the onset of the pandemic, businesses have been partially shielded from insolvency both by the direct financial support on offer as well as by temporary measures suspending and relaxing insolvency procedures.
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Business Live's South West Business Reporter is William Telford. William has more than a decade's experience reporting on the business scene in Plymouth and the South West. He is based in Plymouth but covers the entire region.
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So, once the temporary regime is over and businesses are forced to confront a 鈥渘ew normal鈥, there could be a significant uptick in the number of company insolvencies, despite interest rates remaining low in the short term, the report said.
This could mean a peak of about 8,000 海角视频 insolvencies around the turn of the year before numbers fall back again to around 4,000 per quarter.
The outlook beyond the short-term paints a less strong picture, however, with the end of the super deduction allowance and the rise in corporate tax causing a sharp fall in business investment from 2023, while consumers readjust their spending patterns.
Yael Selfin, chief economist at KPMG 海角视频, said: 鈥淎s restrictions are lifted and consumers flock back, we expect a robust recovery ahead. Some sectors, such as manufacturing and construction, have already recovered most of the ground lost last year, while for others such as hospitality, the big times are now.
鈥淏ut the possible emergence of new variants of the virus that are less responsive to the current vaccines is still a downside risk, albeit less severe than previously, as the economy has adapted to operating under social distancing restrictions. An expected rise in the level of insolvencies, as Government support programmes are withdrawn, could also impact recovery.鈥
