As we all know coronavirus is prevalent throughout the world at the moment but the UK economy seems to be one that is greatly affected by this pandemic compared to most. We currently have the most deaths in Europe and the second most in the world! However, is there light at the end of this dark tunnel? The pandemic is likely to cause a recession in the UK. And this could be one of the largest percentage decreases in growth since the credit crunch. The National Institute of Economic and Social Research (NIESR) predicts that this lockdown could cause a 15% to 25% decrease in GDP depending on the length of the lockdown. The financial crisis and total fall over the credit crunch is not comparable with the forecast for the 2nd quarter which runs from April to June. This fall in GDP would be even bigger than the slump of 1921 and the declining growth would be far steeper than anything seen in the Great Depression. Unemployment is likely to increase by double from 1.5 million to 3 million in 2020, however the National Institute of Economics and Social Research predicts that the country will have a raise by another 800,000 in early 2021.
Although a recovery is due and come mid to late 2021, when factories can fire up production and families can do more shopping the economy is likely to recover however this will take a relatively long time to get back to normal. Due to the governments rather large spending habits during this quarantine as a result tax may have to be increased however interest rates will remain low to encourage spending. The UK is likely to have a deeper fall in terms of GDP growth in comparison to many other countries during this period (due to their ageing population and many foreign employees) the rebound is likely to be bigger in 2021. This recession and situation that we are all currently in is very unfortunate and we will be paying it in many years to come.
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