Coronavirus ‘has brought UK economy to standstill’

THE coronavirus outbreak has brought the UK economy to a temporary standstill, according to a quarterly report.

KPMG UK’s latest quarterly Economic Outlook forecasts a 2.6 per cent decline for 2020 – with flat growth predicted in the second half of the year.

But a protracted outbreak of Covid19 could also result in a more severe impact than the 2008-09 downturn with a 5.4 per cent fall.

In both scenarios though, the report suggests the country’s economy is expected to recover by the second half of 2021 – assuming the public health measures put in place stem the rise in the number of cases.

Yael Selfin, KPMG UK’s chief economist, said: “The Covid-19 pandemic is first and foremost a human crisis.

“But there will also be a very substantial negative impact on the global economy and the UK’s economic performance this year and potentially next, but the economy is expected to recover by the second half of 2021.

“Until we know how and when the Covid-19 outbreak will end, the scale of the negative economic impact will be difficult to quantify.

“However, it is now almost certain that the UK is slipping into its first significant downturn in over a decade.” On Friday, Chancellor Rishi Sunak said employers would be able to apply to HM Revenue and Customs to cover 80 per cent of the wages of staff they keep on up to £2,500 a month.

Economists have said the bill to taxpayers for the Government’s unprecedented scheme could run to billions of pounds a month.

The Bank of England also cut the base rate of interest to a record-low 0.1 per cent to ease pressure during the pandemic.

In Scotland, a £350million support fund was announced to help those left struggling in the wake of the outbreak as part of Scottish Government measures worth around £1.9billion.

Catherine Burnet, senior partner at KPMG UK in Scotland, said: “The latest Economic Outlook data highlights the scale of the challenge facing businesses across Scotland. Fiscal measures and immediate relief action from the Scottish and UK Governments have gone some way to help mitigate some of the damage, but there’s widespread acknowledgement that more action will be needed in the coming months to keep the economy moving.”

‘The scale of the negative impact will be difficult to quantify’