The UK’s economy is not expected to return to normal until 2023 due to the coronavirus pandemic, according to a new report issued by economic forecasting group EY Item Club.
The group has warned that it is likely to take three years for the UK economy to return to the “same size” as the final quarter of last year.
According to the report, the UK economy will see a decrease in consumer spending and business investments.
EY also warned that the Covid-19 pandemic could result in a 6.8% decrease in GDP in 2020.
The report stated if the Covid-19 lockdown began to be eased throughout May and June, the economy could grow by 4.5% in 2021. Unemployment is also expected to rise by 6.8% this year, a level which has not been seen since 2014.
This is also expected to decrease due to the 14% fall in consumer spending, resulting in retailers such as Oasis and Warehouse and Cath Kidston going into administration.
Howard Archer, chief economic advisor to the EY Item Club, said: “The UK economy is clearly in for a very difficult year with GDP expected to contract around 13% quarter-on-quarter in Q2. To put this into perspective, the largest quarter on quarter contraction suffered during the 2008/9 financial crisis was 2.1% in Q4 2008.
“Our report assumes that the government’s measures aimed at supporting businesses and saving jobs will have a significant positive impact, which is absolutely crucial to limiting the potential longer-term damage to the economy.”
