Experts warn of economy facing double-dip recession

WARNINGS over a double-dip recession have ramped up as experts predict the economy will plunge between now and March as England is placed in lockdown for the third time.

Leading economists said gross domestic product (GDP) – a measure of the size of the economy – is now expected to fall in both the final quarter of 2020 and first three months of 2021, plunging the UK back into recession, as defined by two successive quarters of falling output. The economic woes are likely to see pressure mount on the Bank of England to take further action, with speculation swirling again over the possibility of negative UK interest rates.

Economist Allan Monks at JP Morgan is predicting the latest Covid-19 measures will see GDP slump by around 2.5% in the first quarter of 2021.

He said the third lockdown would

“hit the economy harder” than in November due to school closures and tightened measures.

Most experts are already predicting a small fall in GDP in the final quarter of 2020, with the Bank of England last month predicting a 1% decline.

While the drop is far lower than the mammoth GDP fall seen amid last spring’s lockdown, when the economy plummeted nearly a fifth, it comes as output is still a long way from regaining its poise. Mr Monks said the economy was “already running 11% below normal heading into this lockdown”.

He said the “path to recovery has been pushed back further” but added there was hope for 2021.

The extension of the furlough scheme and another £4.6 billion for retail, hospitality and leisure sites will help cushion the blow in the first quarter, but all eyes will also be on the Bank for any further support.