Virus dampens UK forecast for growth
THE growth rate of the UK economy is expected to slow sharply as a result of the impact of the coronavirus, according to the latest forecast by the British Chambers of Commerce (BCC).
The business membership body has cut its growth forecast for the economy in 2020 from its previous 1% position to just 0.8%
Outside of the 2008-09 financial crisis, this would be the weakest fullyear growth outturn since 1992 and down sharply from UK GDP growth of 1.4% in 2019.
BCC said that gross domestic product growth is then expected to be 1.4% in 2021 and 1.6% in 2022.
Its forecast indicates that by the end of 2022, the UK economy will have grown below its historic average growth rate of 2.6% for eight successive years, the longest period since records began.
The disruptive impact of coronavirus is expected to weigh significantly on key drivers of UK GDP growth through the first half of 2020.
BBC said the lack of clarity on the UK’s future trading relationship with the EU and other partners around the world and a struggling global economy is also predicted to limit UK’s near-term growth prospects:
■ UK export growth in 2020 is projected to be its weakest since 2009 as a subdued global economy, the impact of coronavirus and uncertainty over future trading arrangements constrain export activity.
■ Business investment is expected to contract by 0.7% this year as the impact of coronavirus, the cost of doing business in the UK and a lack of clarity on the future trading conditions limit investment intentions.
■ Growth household spending in 2020 is predicted to be at its slowest since 2011, as the effect of coronavirus temporarily weakens consumer demand, despite historically low unemployment.
On the upside, historically strong UK and Welsh government spending – both observed in the Budget and anticipated in the upcoming Spending Review and Autumn Budget – is expected to support the UK economy through the forecast period.
The measures announced by the Bank of England, including lowering interest rates and steps to support business access to finance, will also help mitigate some of the impact of the coronavirus on the UK economy.
Suren Thiru, head of economics at the BCC said: “Our latest forecast indicates that the UK economy faces a challenging short-term outlook.
“It is increasingly likely that the boost from higher government spending and more political certainty will be surpassed over the nearterm by the negative impact of coronavirus on the UK economy.
“Although the scale and impact of cronavirus remains highly uncertain, early evidence of disruption to supply chains and weakening in consumer demand and business activity could mean that even in the case of a temporary shock to the economy, there may be some long-term impact on economic output – particularly if significant action is needed to combat its spread.”