UK economy set to be hardest hit by coronavirus, OECD warns
10 June 2020, 14:06 | Updated: 10 June 2020, 14:08
The UK's economy is likely to be the worst affected among developed countries due to coronavirus, a major thinktank has warned.
The Organisation for Economic Co-operation and Development (OECD) said Britain's economy was likely to slump by 11.5% in 2020 - above the slumps expected for other developed nations which have also suffered during the pandemic.
The UK's economy could contract by 14 per cent if there is a second wave of Covid-19 later this year.
Falls of 11.4 per cent are expected in France, 11.1 per cent in Spain, 11.3 per cent in Italy and 6.6 per cent in Germany.
The US is on course for its economy to shrink by 7.3 per cent in 2020, and 2.6 per cent in China, the OECD said.
The OECD expects the world economy to contract by 6 per cent this year, with all countries suffering a deep recession, and cautioned that the recovery will be slow and "possibly interrupted".
It predicts global GDP to recover with a 5.2 per cent rise in 2021.
But in its equally possible "double-hit scenario", where there is a second wave of Covid-19 in 2020, world GDP could plummet by 7.6 per cent this year and the recovery would be even slower next year, with activity edging up by just 2.8 per cent.
The OECD warned: "The crisis will cast a long shadow over the world and OECD economies.
"By 2021, it will have taken real income per capita in the majority of OECD economies back to 2013 levels in the double-hit scenario, and to 2016 levels in the single-hit scenario."
The UK's economy is expected to bounce back by 9 per cent in 2021, but in the second wave scenario, the recovery would be slow and painful, with growth of just 5 per cent in 2021.
It said UK activity has suffered particularly badly, because of Britain's largely service-based economy.
The services sector, which includes financial services, retail, hospitality, real estate and tourism, makes up around three quarters of UK GDP and has been badly impacted by the lockdown restrictions to contain Covid-19.
The picture is grim worldwide, however, and many countries face ballooning government debt as they seek to offset the economic effects of the pandemic.
OECD chief economist Laurence Boone said: "Both scenarios are sobering, as economic activity does not and cannot return to normal under these circumstances.
"By the end of 2021, the loss of income exceeds that of any previous recession over the last 100 years outside wartime, with dire and long-lasting consequences for people, firms and governments."
She added: "Extraordinary policies will be required to walk the tightrope towards recovery.
"Even if growth does surge in some sectors, overall activity will remain muted for a while."
Shadow chancellor Anneliese Dodds said: "Today's evidence from the OECD is deeply worrying, showing the UK was particularly exposed when the coronavirus crisis hit.
"The Government's failure to get on top of the health crisis, delay going into lockdown and chaotic mismanagement of the exit from lockdown are making the economic impact of this crisis worse."