The EY ITEM Club now expects the economy to grow 6.8 per cent this year rather than the 5.0 per cent growth expected in January.

The improved near term outlook means the UK economy is expected to regain its pre-Covid-19 peak in the second quarter of 2022 – an improvement on January’s forecast of the third quarter of 2022, and the 2023 and 2024 dates predicted previously.

Suzanne Robinson, office managing partner for EY in US, said: “Of course we welcome the movement of jobs from Whitehall and the South, such as the Bank of England and the Department for Transport North hubs both being based in Leeds.

“However, if our economy here in the North is to continue to grow, we also need to create the conditions to hot house more innovative companies. It’s a virtuous circle – as more of these fast growth businesses come to the fore, they give confidence not only in our ability to recover but to build back bolder.

“We have the platforms – leading education, science, R&D opportunities and thriving digital and media hubs, which will be further bolstered by Channel 4’s Leeds HQ and the news that hundreds more BBC jobs will be relocating North. We already understand the importance of connecting our villages, towns & cities through better transport networks, exploiting technology to drive new channels for business and investing in the skills, health and wellness of our communities.

“However, to be yet more productive we need to look to opportunities presented by gigabit connectivity, energy transition and sustainability.”

The upgraded forecast primarily reflects the UK economy’s resilient performance in the lockdown-affected fourth quarter of 2020 and first quarter of 2021, providing a better than expected platform for growth through the rest of this year.

EY said the substantial near term fiscal support for the economy announced in the Chancellor’s Budget, the roadmap towards economic reopening, and the continued rapid roll out of Covid-19 vaccines have also helped to improve growth prospects.

The EY ITEM Club now believes that GDP contracted by just over 1 per cent quarter-on-quarter in the first quarter of 2021, rather than the 3 to 4 per cent contraction expected in January’s Winter Forecast. Looking ahead, growth in the region of 4-5% quarter-on-quarter is expected in 2021’s second quarter, with the economy helped by the continuation of the reopening roadmap and supportive fiscal and monetary policy.

Howard Archer, chief economic advisor to the EY ITEM Club, said: “The UK economy has proven to be more resilient than seemed possible at the outset of the pandemic.

“Businesses and consumers have been innovative and flexible in adjusting to Covid-19 restrictions and, while restrictions have caused disruption, lessons learned over the last 12 months have helped minimise the economic impact.

“Our latest forecast suggests that the UK economy will emerge from the pandemic with much less long term ‘scarring’ than was originally envisaged and looks set for a strong recovery over the rest of the year and beyond. There will be some issues to look out for though, not least inflationary risks which will grow as the recovery gains pace and monetary policy remains accommodating. Interest rates aren’t likely to rise until late 2022 or early 2023 at the earliest.”