Coronavirus 'to deliver weakest growth since the financial crisis'

The spread of coronavirus is expected to cause a sharp slowdown in UK economic growth, leading business leaders today claim.

Following the latest economic forecast by the British Chambers of Commerce (BCC), the organisation has downgraded its UK GDP growth expectations for 2020 to just 0.8 per cent.

Outside of the 2008/09 financial crisis, this would be the weakest full-year growth outturn since 1992 and down sharply from UK GDP growth of 1.4 per cent in 2019.

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The disruptive impact of Coronavirus is expected to weigh significantly on key drivers of UK GDP growth through the first half of 2020.

CoronavirusCoronavirus
Coronavirus

This, combined with a lack of clarity on the UK’s future trading relationship with the EU and other partners around the world and a struggling global economy, is also predicted to limit UK’s near-term growth prospects. In its forecast, the BCC also said it expects UK export growth in 2020 to be its weakest since 2009.

It predicts that business investment will contract by 0.7 per cent this year and that growth in household spending will be at its slowest since 2011, as the effect of Coronavirus temporarily weakens consumer demand, despite historically low unemployment.

Suren Thiru, Head of Economics at the British Chambers of Commerce, said: “It is increasingly likely that the boost from higher government spending and more political certainty, will be surpassed over the near-term by the negative impact of Coronavirus on the UK economy.

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“Although the scale and impact of Coronavirus remains highly uncertain, early evidence of disruption to supply chains and weakening in consumer demand and business activity could mean that even in the case of a temporary shock to the economy, there may be some long-term impact on economic output – particularly if significant action is needed to combat its spread.

Economic impact.Economic impact.
Economic impact.

“Failure to achieve a UK-EU arrangement conducive to trade is also a key risk to the outlook for the UK economy as disruption in early 2021 could adversely affect economic conditions.”

The outlook for the longer term is far more positive, with BCC saying that UK GDP growth is then expected to pick up in subsequent years: to 1.4 per cent in 2021 and 1.6 per cent in 2022.

“Our forecast indicates that by the end of 2022, the UK economy will have grown below its historic average growth rate of 2.6 per cent for eight successive years, the longest period since records began”, it said.

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Adam Marshall, director general of the British Chambers of Commerce, added: “Coronavirus could further weaken an already stagnant UK economy, as many businesses are starting to report an impact on their cashflow and growth prospects. More will need to be done later in the year to boost business confidence and tackle prolonged economic stagnation.”

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