Coronavirus sets UK on course for deepest recession since 2008
The UK is set for the deepest recession since the 2008 financial crisis as the coronavirus pandemic ravages the economy.
The Centre for Economics and Business Research (CEBR) predicts the UK economy will shrink marginally in the first quarter year, by 0.5 per cent, before contracting a staggering 15 per cent in the second quarter.
The assumption is that restrictions on businesses and the wider population will be loosened by the third quarter as testing becomes more widely available.
The biggest proportional hit is likely to come from a decline in business investment, which the CEBR predicts will be down 13 per cent in 2020. Forecasts suggest it will take until 2032 for business investment to catch up with its 2017 peak unless measures are taken by the government.
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The government’s epidemiology adviser, Professor Neil Ferguson, warned that the entire population may need to stay home until June. Even when the lockdown is lifted, Ferguson said people would probably still be asked to enforce some form of social distancing for some months, according to the Sunday Times.
CEBR said it expects the government to introduce measures to kick start consumer spending once the population returns to work, including a temporary VAT cut.
On the assumption the government will take measures in the second half of the year, GDP growth will be four per cent lower than in 2019 and is expected to recover 3.5 per cent in 2021 and 2.5 per cent in 2022.
Additionally, as economists brace for rising levels of unemployment amid a recession, CEBR has said household consumer spending will “experience a substantial hit in the second quarter of the year, declining by around 15 per cent on the quarter.”
Although a recovery in the second quarter is anticipated, consumer spending will be about five per cent lower in 2020, climbing four per cent in 2021.