Plumbing the depths

new world economy

Yesterday The Office of Budget Responsibility in the UK tried to update its forecasts for the UK economy. They emerged at the pessimistic end of the current range of estimates but attracted news coverage because of who they are. They anticipate on the scenario they published a fall of 35% in the UK second-quarter GDP, with a recovery thereafter. The half-yearly fall would be 17% and the annual 13%. They assume for this forecast a three month shut down followed by a three month period of progressive relaxation. This leads to a big increase in the unemployment rate to 10%, up from 4%. Public sector receipts plunge by £130 billion as less income is available to tax and fewer transactions means lower turnover based levies. Public spending rises by £85bn compared to non-virus budget plans. Additional state borrowing in 2020-21 rises from the planned £55bn to £278bn. The downturn is considerably larger than in any recession in the last 100 years.

The new economy after the pandemic will be smaller with more companies and people worse off from the period of lost work, lost cash flow and lost jobs.

View Full Article – published by Charles Stanley on 15th April 2020