Covid-19 will hit economic growth
UK economic growth is expected to slow sharply in 2020 amid the impact of coronavirus, according to the latest economic forecast by the British Chambers of Commerce (BCC). It has downgraded its UK GDP
growth expectations for 2020 to 0.8%, from its previous forecast of 1.0%. Outside of the 2008/09 financial crisis, this would be the weakest full-year growth outturn since 1992 and down sharply from UK GDP growth of 1.4% in 2019. UK GDP growth is expected to
pick up in subsequent years: to 1.4% in 2021 and 1.6% in 2022. BCC’s forecast indicates that by the end of 2022, the UK economy will have grown below its historic average growth rate of 2.6% for eight successive years, the longest period since records began. The disruptive impact of
coronavirus is expected to weigh significantly on key drivers of UK GDP growth through the first half of 2020. A lack of clarity on the UK’s future trading relationship with the EU and other partners around the world and a struggling
global economy is also predicted to limit UK’s near-term growth prospects:
• UK export growth in 2020 is projected to be its weakest since 2009 as a subdued global economy, the impact of coronavirus and uncertainty over future trading arrangements constrain export activity
• Business investment is expected to contract by 0.7% this year as the impact of coronavirus, the cost of doing business in the UK and a lack of clarity on the future trading conditions limit investment intentions
• Growth in household spending in 2020 is predicted to be at its slowest since 2011, as the effect of coronavirus temporarily weakens consumer demand, despite historically low unemployment
On the upside, historically strong
levels of Government spending are expected to support the UK
Suren Thiru
economy. The measures announced by the Bank of England, including lowering interest rates and steps to support businesses to access to finance, will also help mitigate some of the impact. Suren Thiru, Head of Economics
at BCC, said: “Our latest forecast indicates the UK economy faces a challenging short-term outlook. “It is increasingly likely the boost
from higher Government spending and more political certainty will be surpassed over the near-term by the negative impact of coronavirus on the UK economy.
“Although the scale and impact
remains uncertain, early evidence of disruption to supply chains and weakening in consumer demand and business activity could mean even in the case of a temporary shock to the economy, there may be some long-term impact on economic output – particularly if further significant action is needed to combat its spread. Failure to achieve a UK-EU arrangement conducive to trade is also a key risk to the outlook for the UK economy as disruption in early 2021 could adversely affect economic conditions.”
business network April 2020
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