Britain’s economy could contract by 35 percent and unemployment could jump by two million by June, according to the Office for Budget Responsibility (OBR).
The OBR published the estimate in a study today (April 14) outlining the economic impact of a three-month lockdown, followed by a quarter of restrictions being partially lifted.
The UK’s fiscal watchdog detailed a scenario where GDP could bounce back quickly after a sharp contraction in the April to June period. It also estimated that the jobs market would take longer to recover. Despite a bounce back, the OBR said the economy could still shrink by 13 percent across the full year.
The OBR also said Britain’s unemployment rate could rise to 10 percent – its highest level since the recession of the early 90s – but its study added: “The immediate cost of the government’s actions may be high, but we can be confident that the cost of inaction would ultimately have been much higher.”
Responding to the OBR’s study in the government’s daily update this evening, chancellor Rishi Sunak said the findings “have serious implications for the UK economy”.
He added that the OBR’s estimate “may not even be the worst case scenario” and that the country would need to be prepared for hardships ahead.
The scenario outlined by the OBR would see public sector net borrowing increasing by £218bn in 2020-21, reaching 14 percent of GDP. That would be the largest single-year deficit since the Second World War.
Its study stated that “the longer the period of economic disruption lasts, the more likely it is that the economy’s future potential output will be scarred.”