UK economy ‘will be worst hit in the West’

BRITAIN will be more damaged by the coronavirus crisis than any other major developed economy, experts warned yesterday.

They predicted the UK economy will shrink by 11.5 per cent this year as the world is in the grip of the ‘most severe economic recession in almost a century’.

The figure is more than all the other G7 members: France, Germany, Italy, the US, Canada and Japan.

It is also almost twice as sharp as the six per cent decline forecast across the world. And as countries emerge from lockdown, the Office for Economic Co-operation and Development report warned a second wave of infections would inflict even more damage if new restrictions were introduced.

In this scenario, which the Paris-based think-tank said is highly likely, it warned that Britain’s economy would again be among the hardest hit, shrinking 14 per cent this year.

Of the G7 group of advanced economies, the OECD said only France would fare worse, contracting by 14.1 per cent while Italy’s economy is also expected to contract 14 per cent.

Germany, would see its economy shrink 8.8 per cent while the world economy would contract by 7.6 per cent.

In a gloomy report, the OECD said the Covid-19 pandemic was a ‘global health crisis without precedent in living memory’ and the worst economic slump since the Great Depression of the 1930s. It added: ‘With or without a second outbreak, the consequences will be severe and long-lasting’.

Chief economist Laurence Boone referred to the fiendishly difficult balancing act faced by ministers wanting to protect lives but prevent the economy from collapse.

‘As long as no vaccine or treatment is widely available, policymakers around the world will continue to walk on a tightrope,’ he said.

In the past, the OECD has been heavily criticised for making economic predictions which proved wide of the mark. But amid growing concerns over Britain’s response to the crisis, its forecasts are likely to strike a nerve and fuel debate about how quickly to fire up the economy.

The UK’s heavy reliance on the services sector, which includes hotels, restaurants and the tourism industry, is one reason the economy is expected by the OECD to fare so badly. Another is the high infection and death rate, meaning Britain’s lockdown has been stricter and longer than many other countries.

In reply, Chancellor Rishi Sunak said the UK is not the only nation suffering and insisted the Government’s efforts to prop up the economy will help limit the damage.

Speaking at a John Lewis branch in London to promote the reopening of non-essential shops on Monday, he said: ‘The unprecedented action we’ve taken to provide lifelines that help people and businesses through the disruption will ensure our economic recovery is as strong and as swift as possible.’

Mr Sunak also told Sky News, that there would be ‘ hardship’ ahead and acknowledged that many workers will lose their jobs.

‘It is going to have an impact on people’s jobs and their livelihoods,’ he said. ‘That weighs very heavily on me.’