The coronavirus outbreak could plunge the UK into a recession that would rival that of the 2008-09 financial crisis, experts have warned.
With millions of people out of work, high street shops forced to close their doors, and many companies struggling to stay afloat, the economy is facing an unprecedented period of decline.
Economic research company Capital Economics predicted on March 10 that a pessimistic scenario resulting from the pandemic would see gross domestic product (GDP) fall by 5%, the Financial Times reports.
But just one week later they adjusted that prediction believing a more realistic scenario was a decline of near 15%.
“It’s clear we are in the early days of a big recession,” Paul Dales, economist at Capital Economics, told the FT.
But with much of the high street closed for the foreseeable future figures suggest at least a 2% drop in GDP during the first quarter of 2020.
And in the second quarter this could plummet to nearly 8%, JPMorgan economist Allan Monks warned. “The worst is yet to come,” he told the FT.
A YouGov survey has revealed 5% of people in the UK reported having lost their job as a result of the coronavirus outbreak.
In a recent nine-day period the Department for Work and Pensions revealed 477,000 people had registered for universal credit, with the surge likely to be a result of pandemic-related layoffs.
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The massive increase compares to around 55,000 people registering for the welfare benefit during a normal week.
Experts have different theories for how long the economic downturn will last and how difficult it will be to rebound from it. But most agree signs point to a troubling period on the horizon.
According to a report by the Office for Budget Responsibility (OBR) the public sector recorded a modest budget deficit in February, representing a £0.3bn improvement on last year.
This was despite poor weather taking shoppers away from town centres and department stores reporting a 3.6% decline for the month, according to the Office for National Statistics.
However the OBR said its data has yet to reflect the spread of the coronavirus in any significant way.
It said: “In coming months the resulting disruption of economic activity and the policy measures taken by the Government and the Bank of England will increase public sector borrowing and debt significantly.”
Robert Chote, chair of the OBR, said we’ll have to wait until the pandemic passes before we’ll know if the economy will face lasting scars requiring higher taxes or renewed austerity measures to fill the hole.