EY Item Club Says UK Economy To Plunge By Record 15% In Second Quarter

(Alliance News) - Forecasters EY ITEM Club downgraded their expectations for the UK economy, now ...

Alliance News 15 June, 2020 | 12:37PM
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(Alliance News) - Forecasters EY ITEM Club downgraded their expectations for the UK economy, now predicting an 8% fall in gross domestic product during 2020, but nudged up its growth forecast for 2021.

The forecast of an 8% fall makes for worse reading than EY's April prediction of a 6.8% contraction for 2020.

EY also downgraded its second quarter forecast for the UK economy, now expecting a record 15% GDP plunge, and not the 13% decline it predicted in April.

The UK has been forced to introduce bruising lockdown measures to contain the spread of Covid-19, with numbers from the Office for National Statistics on Friday showing the country's economy shrank by a fifth in the month of April alone.

Gross domestic product slumped 20% month-on-month in April, the biggest monthly fall since the series began - far steeper than the falls of 5.8% and 0.2% seen in March and February respectively. In the three months to April, the economy contracted an "unprecedented" 10% on a sequential basis, ONS said.

"Positively, the EY ITEM Club now predicts year-on-year GDP growth of 5.6% in 2021, up from the 4.5% expected in its previous forecast," the forecasters said.

They warned, however, that the UK economy will have to wait until 2023 to return to levels seen at the end of last year.

EY's Chief Economic Advisor Howard Archer said: "The UK economy had been disappointingly lacklustre over the first two months of 2020, even before Covid-19 started to become a factor. After a challenging first half, our forecast shows that the UK economy is expected to start to recover in the third quarter of 2020 on the assumption that the government continues to gradually relax lockdown restrictions."

By Eric Cunha; ericcunha@alliancenews.com

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