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UK Economy – Post Pandemic Predictions

With lockdown lifting, the government’s focus is now fully on repairing the damage from the Covid-19 pandemic to our economy. In this blog we look at three possible five-year economic scenarios outlined by the treasury.

 

Best-case scenario

Under this scenario, economic activity will rebound quickly, with GDP falling by 10.6% this year, but then returning to its pre-pandemic peak by the end of March 2021. Unemployment will reach a peak of 10% during this next quarter, and as many as 1.9 million people would be out of work next year. The government’s budget deficit will be 13% of GDP this year, but will gradually drop to pre-virus levels by 2025.

 

Central Scenario

Under this scenario, GDP will regain its pre-virus peak by the end of 2022, after a fall of 12.4% in 2020. Unemployment could double to 3.5 million in 2021, with a peak unemployment rate of 12% in the final quarter of 2020 – worse than at the height of the 2008 financial crisis.

The increased government borrowing to mitigate this hit to the economy would cause a budget deficit of 16% of GDP. As a result the UK’s national debt would then increase above 100% of GDP for the first time since the 1960s.

 

Worst-case scenario

Under this scenario, economic output would only recover to its pre-pandemic peak by 2024, resulting in a significant number of businesses failing, and persistently high levels of unemployment. Peaking at 13% in the first quarter of 2021, unemployment would be worse than during the 1980s, with as many as 4 million people out of work.

GDP would nose-dive by 14.3% in 2020, creating the worst recession for 300 years. The budget deficit would soar to 21% of GDP.

 

Whatever the future holds, we at ER Grove are here to help your business survive. Please contact us with any queries or concerns so that we can help you prepare for the full range of scenarios.