OBR predicts UK economy could shrink by 35%
The UK economy could shrink by a record 35% this quarter as a result of the coronavirus (COVID-19) lockdown, according to the Office for Budget Responsibility (OBR).
The OBR said that the outcome was modelled on an assumption that the current lockdown would last for three months. It stated that a three-month lockdown followed by three months of partial restrictions would trigger an economic decline of 35.1% in the quarter to June alone.
The lockdown would push up the UK’s borrowing bill to an estimated £273 billion this financial year, or 14% of Gross Domestic Product (GDP).
However, the OBR said extra spending by the Treasury to support the UK economy was crucial to limit economic damage.
The Confederation of British Industry (CBI) responded to the OBR’s COVID-19 predictions, as well as the global economic forecast published recently by the International Monetary Fund (IMF), which predicts a 3% contraction in global growth.
Commenting on the figures, Rain Newton-Smith, Chief Economist at the CBI, said: ‘This makes for bleak reading and stresses the need for the right policies to support our economy through this crisis. The need for co-ordinated global action to rebuild confidence has rarely been greater.
‘The government will also need to work with businesses and many parts of civil society here at home to create a plan to revive the economy once the lockdown is lifted.’
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