Britain’s will see a slow economic recovery rather than a quick bounce-back after its coronavirus shutdown, the head of the country’s budget forecasting office has said.
Robert Chote, head of the Office for Budget Responsibility (OBR), said a scenario, published last month, showing a quick V-shaped recovery was only meant to be illustrative to show the hit to the public finances.
“In practice I think you are likely not to see the economy bouncing back to where we would have expected it otherwise to be by the end of the year, on that assumption, but instead a rather slower recovery,” he told the BBC.
The comments come amid mounting concerns for the UK economy and expectations that a V-shaped recovery is now unlikely.
Economic data last week showed gross domestic product (GDP) contracted by a whopping 5.8% in March, in what was the first step into the deepest recession in living memory.
The crash after the collapse of Lehman Brothers was supposed to be a once-in-a-lifetime occurrence, but early evidence from the Office for National Statistics for the first quarter of 2020 shows Covid-19 will easily eclipse the last crisis.
Almost no aspect of the economy was unaffected in March.
Britain broke all records for a monthly decline in GDP, with just two weeks of restrictions needed to drastically alter the economic landscape.
All three major drivers of growth – services, manufacturing, and construction – went into reverse.
Economists say there is little doubt that worse is set to come and some now fear the dreaded ‘L-shaped’ recovery where unemployment and low growth drags down the economy’s prospects.
But the Bank of England last week produced a detailed report on the UK economy and is more optimistic on the country’s prospects.
Its main “scenario” says GDP would this year shrink by 14% – the worst crash in 300 years.
Crucially however the Bank says the economy will pick up quickly at the end of the year and grow 15% in 2021.
It would then regain its pre-coronavirus size in the second half of next year.