The UK’s economy is not expected to return to normal until 2023 following the coronavirus pandemic, according to a new report.
EY Item Club, a leading economic forecasting group, has warned that it is likely to take three years for the UK’s economy to return to the same size as the final quarter of 2019.
According to its report, the huge drop in consumer spending and business investment will see the UK’s gross domestic product drop by 6.8 per cent this year.
Unemployment is expected to rise to 6.8 per cent in 2020, a level not seen since 2014.
It added that if the lockdown began to be eased throughout May and June that the economy could grow 4.5 per cent in 2021.
This expected drop will largely be due to a 14 per cent decline in consumer spending, which has already seen a number of high-profile retailers including Cath Kidston, Oasis and Warehouse go into administration.
While the economy is expected to return to growth next year, EY said the effects could be far worse if “coronavirus affects the economy longer than expected”.
During the second quarter, EY warns that the coronavirus could cause a 13 per cent dive in GDP, around seven times worse than the largest quarter-on-quarter decline seen in the last financial crisis.
On Friday figures from the Office for National Statistics (ONS) revealed that retail sales saw sharpest fall on record in March as clothing sales plunged by a third.
Total sales volumes in March dived 5.1 per cent compared to February, as many stores shut their doors in the face of the coronavirus. On a year-on-year basis, sales volume declined 5.8 per cent.
On a total sales value basis, March’s figures dropped 5.7 per cent compared to February and six per cent on a year-on-year basis.