UK's economy could shrink by 35% with 2 million more people unemployed due to Covid-19
- The coronavirus could cause the UK economy to plummet to levels worse than those reached in both World Wars, according to the Office for Budget Responsibility.
- The independent body on Tuesday said UK GDP could fall by 35% in the next financial quarter.
- Under this scenario, unemployment would rise to 10%, meaning 3.4 million would be out of work.
- Government officials sought to distance Boris Johnson's government from the findings.
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The UK economy could take a worse hit than it suffered during either World War as a result of the coronavirus according to the official national spending watchdog.
The Office for Budget Responsibility, the independent body which analyses the UK's public finances, on Tuesday, April 14 published a potential scenario under which UK GDP would fall by 35% in the second quarter of this year.
Under this scenario, which is based on the lockdown continuing for a total of three months, with social-distancing measures continuing beyond that, unemployment will rise from 2.1 million to 3.4 million, meaning 10% of people would be out of work.
The UK economy would quickly bounce back under this scenario, with GDP up by around 25% in the third quarter and around 20% in the fourth, after the expected relaxation of lockdown measures and people returning to work.
However, the overall effect on the UK economy would be a 13% decline of GDP in 2020, worse than what the country suffered in both World War One and World War Two. Here's the OBR's graph published today.
- The vast majority of businesses have been closed for three weeks as part of nationwide social distancing measures introduced by Boris Johnson's UK government. This has led some businesses to lay off staff, while others have applied for government loans and grants to cover the wages of employees and keep their themselves afloat.
Bloomberg on Tuesday reported that 1.2 million people had been granted mortgage holidays lasting up to three months.
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