The Office for Budget Responsibility (OBR) has warned that the UK economy could shrink by 35% this quarter due to the COVID-19 crisis.
The OBR said that the outcome was modelled on an assumption that the current lockdown would last for three months. It stated that a three-month lockdown followed by three months of partial restrictions would trigger an economic decline of 35.1% in the quarter to June alone.
The lockdown would push up the UK’s borrowing bill to an estimated £273 billion this financial year, or 14% of Gross Domestic Product (GDP).
However, the OBR said extra spending by the Treasury to support the economy was crucial to limit economic damage.
The OBR’s estimate followed a global economic forecast published by the International Monetary Fund (IMF), which predicted a 3% contraction in global growth.
Rain Newton-Smith, Chief Economist at the Confederation of British Industry (CBI), said:
‘This makes for bleak reading and stresses the need for the right policies to support our economy through this crisis. The need for co-ordinated global action to rebuild confidence has rarely been greater.
‘The government will also need to work with businesses and many parts of civil society here at home to create a plan to revive the economy once the lockdown is lifted.’