The UK’s economic recovery “still has some way to go” and is not likely to hit pre-Covid levels until the end of 2022, the Confederation of British Industry has warned.

It estimates that the economy will shrink by a record 11.1 per cent this year – the worst year for the UK economy since 1709, it says.

But it forecasts growth of 6 per cent in GDP over 2021 and 5.2 per cent in 2022.

The CBI has suggested a number of business investment incentives would help speed up the recovery.

This includes reforming business rates, issuing productivity vouchers to support business innovation by subsiding technology adaption and a call for the government to publish its energy white paper before Christmas.

It says renewed household and government spending will drive the UK’s economic recovery in 2021 but a “more cautious revival in business investment” means it will be the end of 2022 before GDP returns to pre-pandemic levels.

CBI director-general Tony Danker says: “Covid-19 has left deep scars on the economy, but this forecast does offer grounds for optimism. The road to recovery will be long, but the trajectory is positive, and we must do all we can to hasten the journey.

“We simply must find new ways to get businesses investing at the start of 2021 if we are to fast-forward the recovery.

“We’ve had great news on vaccines this week, but if we are to be masters of our own destiny then we must act decisively to rebuild a better economy.

“British business is like a coiled spring ready to release ambition and investment. They just need a chance.”

Despite the summer economic rebound, GDP was still 8 per cent below its pre-Covid peak in September. A second lockdown over November means the CBI expects a 1.7 per cent in GDP over Q4.

It predicts unemployment will peak at 7.3 per cent in Q2 2021. By the end of 2022, it will have receded to 4.9 per cent – still short of the pre-pandemic level of 4 per cent.

CBI lead economist Alpesh Paleja says: “Overcoming Covid would lay a rock upon which business confidence can be renewed. But there is more we can do in the meantime.

“If we are to accelerate the UK’s economic rebound, we must find the missing pieces which complete the recovery picture. This means taking positive steps to foster a more dynamic business environment which rewards entrepreneurship, innovation and investment.

“That can start with a Productivity Vouchers scheme – a time-limited proposal that could help SMEs access new technologies at a discount rate to improve performance.

“Meanwhile, finally reforming our analogue-age business rates system is a must – a system that sinks investment intentions, energy efficiency plans and worsens regional inequalities in its current form in England.

“Businesses have endured a torrid year. But the right action now from the government can bring forward the timescale for recovery and enable UK companies to look to the future with renewed optimism.”