The UK economy will not return to 2019 levels of GDP until 2024, according to new research from accountants and business advisers, BDO, and economic consultants Cebr.
Looking at a baseline scenario – which assumes there will be no large-scale second wave of COVID-19 or another lockdown – the research predicts UK GDP will contract by 11% in 2020.
Business investment is also predicted to take a hit dropping by 14% and remaining low throughout 2021. An increase of up to 7% could be expected in 2022 as the economy stabilises.
Subdued international demand and weaker domestic output will also hinder economic growth, with export levels expected to fall by 19% in 2020. The double-threat of the pandemic and the UK exiting the EU means exporting levels will remain low, with some growth returning in 2021 but stagnating thereafter.
In comparison the research reveals that, in a worst case scenario, in which the UK imposes a second lockdown period due to a new wave of infections, we could see both GDP and business investment drop by 19% in 2020 and exports fall by almost a quarter (23%).
Peter Hemington, Head of M&A at BDO commented: “Despite levels of activity expected to return as restrictions are lifted, this analysis illustrates the longer-term economic impact of the pandemic and the severity of the economic damage caused by COVID-19.
“Businesses will be rethinking their operations and future plans in order to adapt and survive as major investments and planned M&A activity will likely be on hold until there is a more certain and stable outlook. We should assume that the full extent of economic damage will not be revealed until the Government’s Coronavirus Job Retention Scheme comes to an end in October.
“However, with predictions of a faster, V-shaped recovery on the horizon and the Prime Minister announcing large-scale investment in infrastructure, there may be light at the end of the tunnel. The Government must continue to put business at the heart of policy-making and listen to business leaders and groups in order to help the UK to return to sustainable economic growth.”