Economic forecasters expect UK GDP to contract by around 10 per cent in 2020 following a tightening of coronavirus restrictions.
New research published today by PwC has forecast a contraction of between 11 and 12 per cent for the year, while S&P Global has predicted the UK economy will contract by 9.7 per cent.
Both firms anticipate GDP to rebound going into 2021, but uncertainty caused by Covid-19 means the UK’s recovery could take several years.
PwC believes there could be growth of around 10 per cent or 4 per cent next year, depending on the spread of the virus and the measures needed to control it.
If Covid-19 remains relatively contained, the economy could return to pre-lockdown levels by the end of 2021, the report said. However, further outbreaks and lockdowns could see any recovery last until mid 2023.
Meanwhile, S&P said the economy was on course to grow by 15 per cent in the third quarter, and could rebound by as much as 7.9 per cent next year.
However, the report said the UK would not reach pre-pandemic levels until 2024 at least. It cited the tightening of measures and local lockdowns, as well as an “abrupt switch to a bare-bones trade agreement with the EU in the new year” as reasons for the lower forecast.
“Despite the promising start, many hurdles are ahead on the path to recovery, and we now see the economy slightly worse off over the next three years, compared with our previous forecast. Most importantly, COVID-19 is proving hard to beat,” S&P Global Ratings senior economist Boris Glass said.
Most sectors are predicted to return to growth in 2021, according to PwC, including retail and hospitality.
However, in its report it noted that there may be regional variation due to the sectoral mix across regions.
“Regions which have seen targeted lockdown measures are more likely to experience bigger economic impacts, whereas London may recover more quickly as it was less impacted by the drop in output in 2020,” the report said.
Senior economist at PwC, Jing Teow, said: “Uncertainty over the economic outlook and job security, as well as the desire for more precautionary savings, mean that it will take time to recover to normality, even once economies are fully open, although a recovery in 2021 could be buoyed if there is a vaccine.”
He added: “For businesses, too, uncertainty over the outlook, potential overcapacity – especially in structurally challenged sectors such as air travel and tourism – as well as higher debt levels as a result of necessary crisis survival measures, could impact innovation and future productivity growth.
“However, with more money available once recovery has been achieved, a deals-led recovery is likely, with investment opportunities available for savvy businesses.”