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UK Growth Could Fall by 35% in 2020

A recent report suggests that the UK could face a record drop in growth this year. In fact, it is feared that this could be as much as a 35% decline by June.

The Full Details

These figures were provided by the Office for Budget Responsibility, which is the country’s independent tax and spending watchdog. Their numbers are based on the lockdown lasting for a total of 3 months.

In this case, they predict unemployment climbing from its present level of 3.9% to 10%. Yet, they believe that the growth rate will quickly start to recover after the lockdown is lifted, with no lasting damage done to the national economy.

Their report put the country’s borrowing bill at £273 billion for this financial year, which is 14% of the UK’s GDP. This number is based on the lockdown lasting for 3 months, with another 3 months of less stringent restrictions following on from this.

Half of this large drop in the economy could be recovered in the 3 months up to September, according to the study. They think that 2020 overall will see a 13% contraction.

If this were to happen it would be Britain’s biggest drop in GDP since the end of the Second World War. It is thought that the huge financial aid packages put together by the government will allow the country to get back to business as soon as the lockdown comes to an end.

The good news is that the analysts think that the UK will return to its growth levels seen before the COVID-19 crisis by the end of the year.

What Does the Chancellor Think?

Other reports suggest that Chancellor Rishi Sunak has been discussing the issue of the damage to the GDP with his colleagues. It is suggested that they have been considering the possibility of a drop of between 25% and 30% between the months of April and June this year.

While there has been no official confirmation on this subject, it is thought that Sunak and his colleagues are divided over whether social distancing should be relaxed as a way of helping the economy to recover.

What Was Happening Before the Lockdown?

A separate report shows that the country’s financial services industry was beginning to show signs of a slowdown even before the coronavirus outbreak took hold.

This comes from a survey carried out by the CBI, whose results suggest that lower profits and rising bad debts were an issue in the 3 months leading to March this year. Many firms are currently choosing to pay collection agency fees to recover debts.

The profit drop was relatively modest, with 4% more reporting lower profits than those with higher figures. In terms of looking ahead, there was a greater degree of negativity. 53% more financial service companies were feeling negative, while only 12% were looking ahead positively.

Unsurprisingly, these firms expect spending to fall in the next few months, although there were reports of IT spending possibly increasing. In terms of staff numbers, 30% of these companies had hired more people, while 39% had reduced numbers before March.