Latest projections by forecasting group the EY Item Club suggest 2024 will be the year Britain’s economy returns to its 2019 level. GDP was previously expected to match fourth-quarter 2019 size in early 2023.
EY economists claim the economy will shrink by a record 20 percent between April to June, compared to the 15 percent initially forecasted.
Economists expected a return to growth in the third quarter, with an expansion of around 12 percent.
Their 2020 forecast for the UK to an 11.5 percent contraction was also downgraded, worse than the 8 percent decline forecast in June.
A recovery in growth of 6.5 percent next year, up from 5.6 percent predicted in June, has been predicted.
The UK economy may not recover until 2024
COVID-19 has had a severe impact on the UK economy
Gyms and swimming pools reopened at the weekend following the reopening of non-essential shops from June 15 whilst pubs, restaurants and hairdressers opened their doors on July 4.
Weaker-than-anticipated growth of just 1.8% in May is to blame for the downgrades, according to official figures.
The services sector is a major victim of the crisis – despite the easing of restrictions.
Howard Archer, chief economic advisor to the EY Item Club, said: “Even though lockdown restrictions are easing, consumer caution has been much more pronounced than expected.
London during the COVID lockdown
“We believe that consumer confidence is one of three key factors likely to weigh on the UK economy over the rest of the year, alongside the impact of rising unemployment and low levels of business investment.
“The UK economy may be past its low point but it is looking increasingly likely that the climb back is going to be a lot longer than expected.
“May’s growth undershot even the lowest forecasts.
“By the middle of this year, the economy was a fifth smaller than it was at the start.
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“Such a fall creates more room for rapid growth later, but it will be from a much lower base.”
EY expects the unemployment rate to more than double to nine per cent at the turn of the year.
This includes a rise from 3.9 percent in the three months to May.
This will contribute to weak levels of consumer spending, forecast to fall by 11.6 percent this year before rising by 6.6 percent in 2021 as the jobs market starts to recover.
EY made the prediction
Mr Archer added: “The labour market’s performance is key to the economy’s prospects over both the short term and further out.
“Job losses and poor real wage growth are expected to hold back consumer spending … It is possible that the chancellor will look to provide further help for the labour market in this autumn’s budget.”
The EY Item Club expects the Bank of England to pump a further £100bn into the economy in the autumn, taking total asset purchases to £845bn – but further interest rate cuts below the current 0.1 percent are seen as unlikely.
Mark Gregory, EY UK’s chief economist, said: “Government measures have provided significant short-term support, but many businesses are waiting for more certainty over the economic outlook before making longer term investment decisions.
“Policies such as VAT cuts are welcome, but they aren’t a complete solution, as they don’t resolve the concerns consumers may have about going to restaurants and bars in the first place.”