UK economy set for sluggish recovery - NIESR think tank

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The city of London financial district is seen in London, Britain

LONDON (Reuters) - Britain's economy will grow by little more than 3% in 2021 after a 10% slump last year and - with the hit from COVID and Brexit likely to be felt for years - finance minister Rishi Sunak should offer more emergency support, a leading think tank said.

The National Institute of Economic and Social Research (NIESR) cut its growth forecast for 2021 to 3.4% from a previous estimate of 5.9%, reflecting the impact of the country's third coronavirus lockdown which began this month.

Britain's economy was only expected to return to its pre-pandemic levels by the end of 2023, it said.

Last week, the Bank of England said it expected that to happen in the first quarter of next year.

"Despite the roll-out of vaccines, COVID-19 will have long-lasting economic effects," NIESR Deputy Director Hande Kucuk said on Monday.

By 2025, Britain's economy was likely to be about 6% smaller than expected before the pandemic, reflecting higher unemployment, weaker business investment and Britain's more restricted trading relationship with the European Union.

Sunak - who has promised to spend 280 billion pounds ($384 billion) on Britain's COVID response this financial year, taking the budget deficit to a peacetime high - is due to announce his plans for the next 12 months in a budget statement on March 3.

(Reporting by William Schomberg, editing by David Milliken)