The bounce-back, prompted in part by the UK’s strong vaccine rollout, would take the economy back to pre-pandemic levels by the end of the year – six months sooner than previously forecast.
Andrew Dann, EY’s Channel Islands managing partner, said Jersey and Guernsey were ‘fortunate’ that they had ‘successful vaccine programmes and should see similar positive outcomes on consumer spending, particularly for tourism’.
But local figures in the hospitality sector, Simon Soar and David Warr, warned that businesses in the industry were still facing huge uncertainty over their future.
The latest EY ITEM Club forecast has upgraded its expectations of UK growth for 2021 to 7.6% (up from 6.8% in April), which is the highest annual figure since 1941, and to 6.5% for 2022 (compared with 5% in April). The UK economy fell by 9.8% in 2020.
Mr Dann said that the scale of the recovery was ‘positive news’ for Jersey and Guernsey, which had already weathered the economic storm of Covid relatively well but are closely tied to the UK economy.
‘While some elements of the forecast remain uncertain, the UK has all the ingredients for a strong economic recovery from the pandemic, which is positive news for Guernsey and Jersey.
‘In the Channel Islands, the financial services sector has remained resilient over the past 18 months. This was largely due to the technology being in place to provide accessibility,’ he said.
He added that the better economic climate should help business planning and confidence.
‘After almost 18 months of significant disruption, businesses are beginning to have some space to plan ahead and invest with confidence.
‘This could help businesses catch up on the growth they’ve missed out on if they take the right steps to adjust to a return to a more familiar business environment. Many businesses are reassessing their operation models.
‘As a result of the pandemic, as a firm, we have shifted to a hybrid working model, which builds upon our flexible-working policy to further support the wellbeing of our people, as well as continuing to meet the needs and expectations of our clients,’ he said.
The report warns, however, that inflation could reach 3.5% by the end of the year, with consumers likely to dip into pent-up savings, driving up prices.
The EY ITEM Club forecast says that a number of factors are contributing to its forecast of a record economic rebound.
‘The UK’s improving growth forecast is being driven by evidence of a strong bounce back in consumer spending as the economy has reopened – supported by an estimated £200bn of consumer savings accumulated during the pandemic – and continued support from loose fiscal and monetary policy.
‘The economy’s resilience during the first quarter’s lockdown has also helped the forecast, in addition to the speed of the vaccines rollout, which has allowed more flexibility in the reopening of the services sector.’
Mr Soar, chief executive of the Jersey Hospitality Association, and Mr Warr, owner of Cooper’s Coffee, remained cautious about the outlook for their industry, which has been heavily affected by Covid-19.
Mr Warr said that many businesses were operating week-to-week and sudden government announcements, such as the decision not to allow full reopening of hospitality until the end of August, could cause huge loss of earnings.
‘With the last government decree, two of our cafés saw turnover fall by 30%. That’s how dramatic the impact can be.
‘We supply a lot of cafés and one thing that is noticeable is a lot of the ordering is still very last minute. People are literally planning week-to-week at the moment, with the Covid-19 monster still out there.’
Mr Soar said businesses were plagued by staff sickness, workers being unable to travel and government restrictions.
‘We aren’t out of this yet. We’re still in the middle of the third wave. We need to get to a point where things stabilise and we can actually understand what the lay of the land is,’ he said.