Bank of England: UK economy could shrink by nearly a third

The Bank of England warns that the British economy could be nearly a third smaller by the end of the first half of this year than it was at the start of 2020 as a result of the coronavirus pandemic.

In forecasts published today, the bank says the British economy will shrink by around 25% in the second quarter of the year, but will then start to recover as lockdown restrictions start to be lifted.

In a statement accompanying its policy decisions, the bank says UK GDP is set for a “very sharp fall” in the first half of the year and a there will be a “substantial increase” in unemployment beyond those workers who have been retained by their companies as part of the government’s Job Retention Scheme.

Overall, it says that the British economy could shrink by 14% this year, but that depends on how long the current lockdown restrictions remain in place. Its assumptions are based on the phasing out of both the furlough scheme and social distancing guidelines between June and the end of the year.

— AP