Britain is still on track to face biggest economic slump in 300 years, Office for Budget Responsibility warns in “very worrying” report.
Millions of people could be left unemployed as a result of the coronavirus pandemic as the government’s furlough scheme is unwound, the UK’s fiscal watchdog has projected.
Underpinning all scenarios is the projection that the UK is set to suffer the largest decline in gross domestic product (GDP) for 300 years, leading to a “massive” rise in the government’s budget deficit and an “unprecedented” peacetime rise in borrowing.
Overall, the UK economy may not fully recover from the coronavirus crisis until 2024.
In the worst case scenario, unemployment will rise from its current rate of around 4% to peak at 13% early next year, according to the Office for Budget Responsibility (OBR).
Even in the best case scenario, unemployment will balloon to 10% in autumn this year, while in the “central” scenario it will hit 12% towards the end of 2020.
By contrast, unemployment hit nearly 12% in 1984 and close to 11% in 1992, prompting Labour to say the figures were “very worrying”.
In all three scenarios, the unemployment rate depends on how many people return to work after being furloughed.
In the worst case scenario, one in five workers currently furloughed will be left unemployed when the scheme is fully lifted in October.
All three projections depend on how much long-term economic “scarring” the pandemic causes.
The OBR says it is “highly uncertain” to predict this, as it depends on the course of the pandemic, the development of effective vaccines and treatments, the speed and consistency with which lockdown restrictions can be eased and the effectiveness of policy to protect businesses, foster new opportunities and sustain jobs. Read more