Today the Bank of England (BoE) announced the coronavirus pandemic could cause the UK economy to shrink by 14 percent – its biggest contraction since 1706. The hit to the country’s GDP amounts to about £300billion, or £9,000 for every family in Britain, according to Resolution Foundation.
The BoE said the figures were based on the country’s lockdown being relaxed in June.
The bank said the coronavirus crisis was “dramatically reducing jobs and incomes in the UK”.
BoE governor Andrew Bailey described the downturn as “unprecedented”, and warned there would be no quick return to normality.
He told the BBC: “Not all of the economic activity comes back.
“There’s quite a sharp recovery.
“But we’ve also factored that people will be cautious of their own choice.
“They don’t re-engage fully, and so it’s really only until next summer that activity comes fully back.”
But Mr Bailey did acknowledge that the economy is expected to recover.
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The Bank’s analysis was based on the assumption that social distancing measures will be gradually phased out between June and September.
Resolution Foundation, a UK think tank, pointed out the forecast is likely to cost families £9,000.
James Smith, Research Director at the Resolution Foundation, said: “The Bank’s first take on the economic impact of coronavirus points to a sobering £300 billion shrinking in the size of the economy, and the biggest economic contraction in over 300 years.
“Faced with this huge economic hit, both the Bank and the Government have made the right call in taking bold action to protect firms and families as much as possible.
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“The Bank’s scenario points to a fairly rapid recovery.
“But even if this were to materialise – and it is certainly not guaranteed – Britain is likely to be living with a legacy of high unemployment for some years to come.”
The bank’s latest Monetary Policy Report showed the UK economy is set to plunge into its first recision in more than a decade.
It states the economy shrank by three percent in the first quarter of 2020, and predicts it will be followed by an unprecedented 25 percent decline in the three months to June.
This would push the UK into a technical recession, defined as two consecutive quarters of economic decline.
For the year as a whole, the economy is expected to contract by 14 percent.
This would be the biggest annual decline on record, according to Office for National Statistics (ONS) data dating back to 1949.
It would also signify the sharpest annual contraction since 1706, according to reconstructed Bank of England data stretching back to the 18th Century.
The Bank stressed that the outlook for the economy was “unusually uncertain” at present and would depend on how households and businesses responded to the pandemic.
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