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The prospects of the UK economy returning to its pre-pandemic size are in shambles. To underscore the crisis, unemployment has increased to 9 percent from 3.9 percent in barely a month.
According to the EY Item Club, a leading economic forecast group, the British economy is at risk of shrinking by an enormous 11.5 per cent this year and in the best case scenario will grow by only 6.5 percent next year.
Howard Archer, chief economic adviser to the EY Item Club, said: “The UK economy may be past its low point but it is looking increasingly likely that the climb back is going to be a lot longer than expected”.
Adding to that, Andrew Bailey, the Governor of the Bank of England, said that Britain was entering the “second phase” of the crisis and warned that the risks were “undoubtedly on the downside for a longer and harder recovery”.
However, previously the Office for Budget Responsibility (OBR) struck a more optimistic tone in relation to the so-called “central scenario”. The OBR predicted that growth could be 8.7 percent in 2021 adding that the economy would recover to its pre-coronavirus size by the end of 2022.
But even this rosy prediction doesn’t rule out 3 million people being out of work in the next twelve months.
In addition, Chancellor Rishi Sunak’s £30 billion plan to “save” the economy, primarily by promising to pay firms a £1,000 bonus for every staff member kept on the payroll, has been criticized for favoring certain sectors such as the food services and tourism industries.
To that end, Mark Gregory, EY UK’s chief economist, said: “Government measures have provided significant short-term support, but many businesses are waiting for more certainty over the economic outlook before making longer term investment decisions”.
