EY’s economic forecasting group the Item Club also downgraded its Q2 2020 forecast from a 13 percent contraction to a record 15 percent. This is following reports last week from the Office for National Statistics (ONS) that the UK’s GDP had shrunk by 20.4 percent. This is the biggest contraction since records began in 1997.
The Organisation for Economic Cooperation and Development (OECD) also predicted that the UK economy would shrink by more than any other developed nation, owing to the UK government’s haphazard response to tackling rising coronavirus infection rates.
While record-breaking, these figures came as no shock to many, as the UK economy has been shutdown since COVID-related lockdowns kicked in in March.
On a more positive note, EY now predicts year-on-year GDP growth of 5.6 percent in 2021, up from the 4.5 percent expected in its previous forecast.
The report warns, however, that the UK economy is still not expected to return to its end of year 2019 size until 2023.
UK economy plummets and won’t recover for THREE years says new forecast.
UK economy plummets and won’t recover for THREE years, says new forecast.
The report states: “Consumer spending will obviously take a huge hit in Q2 2020 reflecting the major restrictions on people’s movements, the fact that all non-essential shops are shut, and that the consumer services sector has essentially been closed down with restaurants, pubs, gyms, clubs, salons, etc. banned by the Government from opening.
“Business investment will undoubtedly suffer markedly in Q2 and beyond as it is pressurised by several factors. Meanwhile, UK exports will be hit by sharply contracting overseas markets, notably including the key markets of the EU and the US.”
The report comes following unprecedented measures by the UK government and the Bank of England to get the country back on its feet.
The BoE is expected this week to unleash a further £100billion in stimulus, according to reports from economists.
The forecast comes as shops reopen for the first time since March.
This would bolster the already £200billion cash injection it made months ago. The policy decision is due on Thursday.
Alongside these stark forecasts, research from financial education firm Close Brothers has shown that only around half (54 percent) of UK workers in larger businesses were financially prepared for something as seismic as the coronavirus crisis.
A fifth of those surveyed felt unprepared, including eight percent that explicitly felt “very unprepared”.
Half of workers are now planning to enhance their financial preparedness for events such as this, as unemployment mounts and forecasts continue to darken.
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Britons say they weren’t ready for the coronavirus crisis.
Jeanette Makings, head of financial education at Close Brothers said: “The coronavirus crisis has drastically changed all aspects of life as we know it, but it has also brought a sharper focus on money, particularly in how prepared we are to weather unexpected financial events.
“While it’s hugely reassuring to see that over half of workers in larger businesses felt financially prepared, there are still a large proportion that are not, so there’s more work to be done there with individual employees and via their employers to support improved financial resilience.
“But there are some positives messages regarding people’s changing attitudes to their own financial health; with people keeping a closer eye on day to day spend, realising they can happily live on less and putting the money they would otherwise have spent into savings instead, all of which bodes well for their future finances. Although we are yet to see if these changes are a permanent or temporary legacy.”