The looming lockdown for England will undo the economic progress made over the summer and push Britain into a double-dip recession, according to revised forecasts from leading economists.
Back in April, the first full month of the first lockdown, the UK economy shrank by a record 20.4%. Now, experts are warning that the tighter restrictions announced by Boris Johnson on Saturday will “obliterate the country’s fragile economic recovery”, The Times reports.
Many are predicting that the final-quarter GDP will shrink by as much as 8%. And Gerard Lyons, an economic adviser to Johnson when he was London mayor, told The Guardian that the contraction could be as high as 10%.
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Howard Archer, chief economic adviser at forecasting group EY Item Club, agrees that there is “little doubt” a new national lockdown will “cause the economy to contract in the fourth quarter and very possibly by an appreciable amount”. Paul Dales, economist at Capital Economics, added: “The recovery has been quite good and we were making progress but it will go into complete reverse in a short while.”
Bank of England policymakers are expected to agree to inject up to £100bn into the economy when they meet this week. The nine-strong Monetary Policy Committee (MPC) was already poised to announce “gloomier economic forecasts” even before the prime minister announced the drastic tightening of restrictions to tackle rising Covid-19 infection rates, The Guardian reports.
The MPC is said to favour quantitative easing to stimulate the economy - a process in which the Bank creates a form of electronic money that can be used to purchase UK government bonds.
Government borrowing from April to September was nearly four times the £54.5bn borrowed in the whole of the last full financial year. Meanwhile, debt has already hit £2.06trn, equivalent to 103.5% of GDP and a 60-year high.
