Five years for economy to bounce back says report
By Rob Freeman | 27th July 2020
The UK economy may not return to its pre-coronavirus level until the end of 2024, according to a leading economic forecast.
The EY Item Club's projections had said GDP would return to the level seen at the end of 2019 by early 2023, but its latest predictions have pushed that back 18 months as hopes of a V-shaped recovery fade.
EY said the economy will fall by a record 20 per cent between April to June - against the 15 per cent predicted last month - before a growth of around 12 per cent in the third quarter of the year.
And the predictions put the forecast contraction for the year at 11.5 per cent, worse than the eight per cent forecast in June.
But next year's predicted growth has gone up from 5.6 per cent to 6.5 per cent.
EY's chief economic advisor Howard Archer told the Guardian: "Even though lockdown restrictions are easing, consumer caution has been much more pronounced than expected.
"We believe that consumer confidence is one of three key factors likely to weigh on the UK economy over the rest of the year, alongside the impact of rising unemployment and low levels of business investment.
"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."
He continued: "May's growth undershot even the lowest forecasts. By the middle of this year, the economy was a fifth smaller than it was at the start.
"Such a fall creates more room for rapid growth later, but it will be from a much lower base."
The report also had bad news for the jobs market with the unemployment rare expected to hit nine per cent by the end of the year - up from 3.9 per cent in the three months to May.
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