The Bank of England has warned coronavirus could see the economy plunge 14% this year in the worst annual fall for more than 300 years.
In its first official outlook on the toll taken on the UK’s finances by the Covid-19 pandemic, the Bank cautioned over a “very sharp” fall in GDP of close to 30% over the first half and a “substantial” hike in unemployment.
It expects gross domestic product (GDP) to fall by around 3% in the first three months of 2020 and then plunge by a further 25% in the second quarter, although it said there was uncertainty over the forecasts.
Britain’s unemployment rate could hit 9% in the second quarter as the lockdown hammers firms across the economy, although with six million people expected to have been furloughed, it said Government schemes will help soften the blow.
The grim forecast came as the Bank held interest rates at the historic low of 0.1% after recent emergency action.
It said the fall should be temporary and that activity should “pick up relatively rapidly” as lockdown is eased, but added that it would “take some time” for the economy to recover.