Unemployment could increase by two million and UK GDP could fall by 35 per cent in the second quarter of 2020 as a result of the coronavirus pandemic, predicts the Office for Budget Responsibility (OBR).
THE OBR said the lockdown imposed by Boris Johnson would likely “deliver large (but hopefully temporary) shock to the economy and public finances.”
Experts at the independent body that advises the government said the figures were based on an assumption there would be a three-month lockdown followed by another three-month period when restrictions were partially lifted.
The OBR said in this scenario unemployment would likely rise to 10 per cent of the working population, but will ease off later in the year. “Real GDP falls 35 per cent in the second quarter, but bounces back quickly,” the OBR added.
Public sector net borrowing is also forecast to reach 15 per cent of GDP making it the largest single-year deficit since the Second World War.
The impact of the UK’s lockdown measures will be reviewed later today by scientific advisers for the government. The Scientific Advisory Group for Emergencies (Sage) will look at a range of issues, including hospital admissions, testing, data on intensive care capacity and death and the effectiveness of face masks.
Its evaluation will be passed to the government, but ministers have already said it is unlikely restrictions will change. Work and pensions secretary Therese Coffey said: “This is going to take months to really win the war on coronavirus.”
The World Health Organisation has said restrictions should be lifted slowly and not “all at once” to avoid a resurgence of the virus, and only if appropriate measures are in place, including “significant” capacity for contact tracing.
Anneliese Dodds, Labour’s shadow chancellor, said it was “absolutely critical that government now does all it can to minimise the depth and length of the economic impact from necessary anti-Coronavirus measures.”