The continuing impact of the Covid-19 virus is expected to see the UK economy contract by 7.2% in 2020, with the economy unlikely to be able to fully restart until a vaccine or effective treatments for the virus are available.
This is according to KPMG UK’s latest quarterly Economic Outlook, which considered four alternative scenarios for the timing of the recovery, based on potential different dates of the pandemic being eradicated in the UK.
KPMG’s main scenario assumes that a vaccine will be available from July 2021, enabling all social distancing measures to be removed and pandemic-related uncertainty to dissipate by the following month.
In this case, with lockdown restrictions lifted in the summer, activities could resume more fully in the second half of 2020.
However, the UK could start 2021 with another negative shock to the economy due to the end of the transition period with the EU, with GDP contracting at least during the first quarter of the year. This would see UK GDP recover only modestly next year, rising by 2.8%.
Yael Selfin, chief economist at KPMG UK, said: “These are difficult times. The UK economy is amidst the most severe economic downturn in modern times, with no clear end to the current crisis.
“Considerable uncertainty remains around the timing of a vaccine which will impact the timing and speed of the recovery, as well as the extent of any permanent damage to the economy.”
He added: “That said, there are some tentative signs of a pick-up in activity and we expect to see a partial recovery in the second half of this year as the gradual easing of restrictions brings light to more corners of the economy.
“However, a full resumption of activity is unlikely until a vaccine or effective treatments for Covid-19 is found.”