It will take the UK economy three years to fully recover from the fallout of the coronavirus pandemic, according to a leading forecasting group.
As the damage for jobs and growth unfolds, the EY Item Club said it would take until 2023 for the the economy to return to the level reached at the end of last year due to the depth of the crisis, The Guardian reported.
One month on from the imposition of lockdown measures across Britain, effectively bringing large swathes of the economy to a halt, the group warned that almost half of all consumer spending in 2020 – the major engine of UK growth over recent decades – is at risk of either being delayed or lost completely.
The group of economists stated that GDP was set to collapse by 6.8% in 2020, before returning to positive growth of 4.5% in 2021 as businesses try to make up for lost time and consumers ramp up their spending again.
The forecast is based on the assumption that some lockdown restrictions will start to be eased in May, with controls relaxed further in June. As such, the Item Club believes the economy should benefit later in the year from a degree of pent-up demand as people are allowed to travel again and return to the shops.
Howard Archer, the chief economic adviser to the Item Club, stated that the report assumes that the government’s measures aimed at supporting businesses and saving jobs would have a significant positive impact.
“[The support] is absolutely crucial to limiting the potential longer-term damage to the economy,” he added.
In a separate report, the Royal Society for the encouragement of Arts, Manufactures and Commerce annonced one in three jobs in parts of Britain were at risk due to COVID-19.
It added that Richmondshire in North Yorkshire – which includes chancellor Rishi Sunak’s constituency – tops the list of areas likely to be most affected, with 35% of jobs vulnerable owing to the area’s reliance on hospitality and tourism.
Jobs in London, Oxford and Cambridge, and the London commuter belt were least at risk, it warned.
The Item Club said GDP would fall by about 13% in the second quarter amid the widespread lockdown measures in place across Britain and in other big economies, sliding six times faster than in the deepest quarterly decline of the 2008 financial crisis. Unemployment could hit 6.8%, surging from a rate of 4% before the crisis struck.