News / Economy / Business

UK economy won’t recover to pre-Covid-19 level until end of 2022

Thursday, 26 November 2020 6:26 AM [ Last Update: Thursday, 26 November 2020 6:26 AM ]

A man sits in the viewing area in Greenwich Park with the office buildings of the Canary Wharf financial district in the background in London on November 25, 2020. (AFP photo)

The UK economy is expected to decline 11.3 percent by the end of the year, the worst recession in more than 300 years, and is unlikely to recover until the fourth quarter of 2022.

According to official forecasts, the coronavirus pandemic will cause the UK’s economic output to shrink more than in any year since 1709, while 2.6 million people will have lost their jobs by the second quarter of 2021.

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The government’s fiscal watchdog predicts that GDP will grow 5.5 percent in 2021, followed by 6.6 percent in the following year and 2.3 percent in 2023.

The Office for Budget Responsibility (OBR) forecasts that the economy will be 3 percent smaller by 2025 than projected back in March.

“Our health emergency is not yet over and our economic emergency has only just begun. Our immediate priority is to protect people's lives and livelihoods,” British finance minister Rishi Sunak told the House of Commons on Wednesday while announcing the figures and his plans for public spending.

Sunak promised a "once in a generation investment in infrastructure" as the OBR predicted that borrowing would hit £394bn by the year’s end, the highest recorded in peacetime.

Borrowing will not decline under £100bn in any year of this parliament, the chancellor said.

Meanwhile, Labour’s Anneliese Dodds was critical Sunak for not mentioning Brexit in his speech, despite the dwindling amount of time available to secure a deal.

Boris Johnson lowers expectations of Brexit trade negotiations breakthrough

Prime Minister Boris Johnson

“In less than 40 days, we’re due to leave the transition period. Yet the chancellor didn't even mention that in his speech,” she said.

European Commission President Ursula von der Leyen warned Wednesday the UK that the EU was “well prepared for a no deal scenario” as she told the European Parliament she cannot guarantee the two sides will be able to reach a trade accord.

Trade talks are now entering their “decisive days” but “frankly I cannot tell you today if in the end there will be a deal,” she said.

Under present arrangements, the UK and EU not only have to agree a deal by December 31 but their respective parliaments also have to ratify the agreement within that time frame.

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