- The novel coronavirus could cause the UK economy to plummet at its sharpest rate in more than a century, according to the Office for Budget Responsibility.
- The independent body on Tuesday said UK gross domestic product could fall by 35% in the next financial quarter.
- Under this scenario, unemployment would rise to 10%, meaning 3.4 million would be out of work.
- Government officials sought to distance Prime Minister Boris Johnson’s government from the findings.
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The UK economy could take its steepest hit in more than a century as a result of the novel coronavirus, according to the official national spending watchdog.
The Office for Budget Responsibility, the independent body that analyses the UK’s public finances, on Tuesday published a scenario under which UK gross domestic product would fall by 35% in the second quarter of this year.
Under this scenario, which assumes the strict lockdown measures will last a total of three months, with social-distancing measures continuing beyond that, unemployment would rise to 3.4 million from 2.1 million, meaning 10% of people would be out of work.
The UK economy would quickly bounce back under this scenario, with GDP up by about 25% in the third quarter and about 20% in the fourth, after the expected relaxation of lockdown measures and people returning to work.
The overall effect on the UK economy, however, would be a 13% decline of GDP in 2020, the steepest decline of any year since at least 1908 and more than double the annual declines the UK saw at the end of World War II.
A representative for the Treasury said the economy would have been worse hit if steps had not been taken.
“We need to address the health situation in order to create a sustainable future for the economy,” the person told a press briefing on Tuesday.
The person said the OBR’s forecast was “for illustrative purposes” only, adding: “We aren’t going to be exactly using those figures. But as the chancellor has said, it is clearly going to have a very significant impact and you can see that coming through in the OBR figures.”
The UK is on course to enter a severe recession as a result of the economic damage done by the COVID-19 virus.
The vast majority of businesses have been closed for three weeks as part of nationwide social-distancing measures introduced by Prime Minister Boris Johnson’s government. This has led some businesses to lay off staff, while others have applied for government loans and grants to cover the wages of employees and keep their themselves afloat.
Bloomberg on Tuesday reported that 1.2 million people had been granted mortgage holidays lasting up to three months.
The government is set to extend the measures by another three weeks on Thursday.