Hard blow for British economy

THE UK economy might not recover from the coronavirus crisis until 2024, the fiscal watchdog has warned.

The Office for Budget Responsibility (OBR) said the ‘UK is on track to record the largest decline in annual GDP for 300 years’, warning that the economy could shrink by as much as 14.3% in 2020.

In its latest set of financial forecasts, it said a worst-case scenario would also not see GDP recover to pre-crisis levels until the third quarter of 2024.

Government measures to address the impact of the virus will also result in an ‘unprecedented peacetime rise in borrowing’ this year, to between 13% and 21% of GDP, with the OBR currently predicting borrowing of £322 billion.

UK GDP is set to fall by 10.6% in even its most optimistic projection, the OBR said.

However, this scenario also projects that GDP could recover to its pre-virus peak by the first quarter of next year.

In its middling scenario, the OBR suggests GDP could fall by 12.4%, before returning to its pre-virus level by the end of 2022, with ‘elevated’ levels of unemployment and business failures

Despite a recovery in output starting in May, the OBR said it assumes that GDP for June will be ‘20% below its level in February’.

The regulator said it therefore expects that GDP will have fallen 21% in the second quarter of the year, following a 2% fall estimated by the Office for National Statistics (ONS) for the first three months of 2020.