UK economy: Economists warn of prolonged recession

UK economy: Economists warn of prolonged recession

The U.K. economy, despite the government’s efforts to revive it, is expected to suffer a prolonged recession as the number of coronavirus cases continues to climb.

In a report published by The Guardian, City economists claimed that efforts to drag the U.K. economy up from its deepest recession is “running out of steam” and therefore puts the country at risk of continued recession.

U.K. economy to suffer longer recession

While the aim is to mitigate the second wave of coronavirus, experts claimed that the implementation of new and tougher restrictions poses a threat to Britain’s economy.

Analysts from the Bank of America, for instance, sees the country’s gross domestic product to stall in the fourth quarter and will continue in the first three months of 2021.

The U.K. economist at the said bank also seconded other analysts’ predictions. He said that Britain had “overshot the equilibrium” after its economy grew faster than what was compatible to keep the health crisis under control.

UK economy: Economists warn of prolonged recession

“We struggle to see how the economy can grow in the fourth quarter with escalating lockdown measures, fading stimulus and Brexit risks,” Robert Wood explained to The Guardian.

Economists also mentioned the Eat Out to Help Out scheme—which boosted the U.KK. economy’s recovery last month—could have triggered the rise of COVID-19 infections.

Per The Guardian, Wood said:

“The timing may be a coincidence but COVID cases spiked shortly after restaurant bookings soared in late August, suggesting the limits to sustainable economic activity.”

GDP could dive by five percent

At the same time, the reintroduction of coronavirus restrictions could trigger a massive loss to Britain’s GDP, per the chief economist at Capital Economics.

Paul Dales said that a possible “circuit break” lockdown next month could incur a five percent decline in monthly GDP. Further stay-at-home protocols could also stall the U.K economy’s recovery and could return to pre-pandemic levels until 2023.

Dales also pointed out the consequences of requiring people to work from home as well as the nationwide curfew on restaurants, pubs, and bars as it could prompt no increases in October, November, and December’s gross domestic product.

The U.K. economy entered its worst recession since data tracking began in the second quarter of 2020 after its GDP plunged by 20.4% following a drop of 2.2% in the first quarter. But recovery was underway after the government eased most of its restrictions, particularly with the aid of its discounted meal program and VAT cuts.

However, given today’s situation, it looks like the recession will not end soon. Economists also consider two months’ growth before a country exits a recession.

Images courtesy of Karolina Grabowska,

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