In a grim forecast, professional services giant KPMG said the economy is unlikely to be able to fully restart until a vaccine or effective treatments for the virus are available,
In its latest quarterly Economic Outlook, KPMG predicted GDP would contract slightly more nationally than regionally with a 7.2 per cent reduction.
It forecasts a modest return to growth in 2021 of 2.8 per cent, far from the “v-shaped” recovery predicted by other analysts who had suggested a steep recession followed by an equally rapid recovery.
As well as the fall in GDP, KPMG is predicting unemployment rate averaging at 8.6 per cent this year and 11 per cent in 2021.
Investment is set to shrink by 12.6 per cent in 2020 before another modest recovery of 1.8 per cent the following year.
Consumer spending is also set to fall sharply, down by 9.5 per cent over the course of this year.
Euan West, KPMG’s office senior partner in Leeds, commented: “Like many parts of the UK, our region’s economy will be severely hampered by the uncertainty of being without a clear end to the current crisis despite a gradual easing of restrictions.
“On the upside, the dominance of the health sector in our regional economy offers some insulation from the downturn, while we are not overly reliant on the hardest hit sectors such as travel and hospitality.”
In making its forecast KPMG modelled four scenarios focused on differing dates of the eradication of the pandemic.
This data assumes lockdown restrictions lifting this summer, so activities can resume more fully in the second half of 2020 and a vaccine will be available from July 2021, enabling all social distancing measures to be removed and pandemic-related uncertainty to dissipate by the following month.
Regarding employment, the report says: “Despite heavy support from the government’s Job Retention Scheme (JRS), the current crisis is having a material impact on the labour market. Lockdown restrictions imposed to combat the pandemic have created a weaker economic environment which could see the national unemployment rate averaging 8.6 per cent this year and 11 per cent in 2021.
“While the JRS could help shield millions of workers from redundancy, further job losses during 2020 may be inevitable as the economy adjusts to the new economic environment. In addition, it is likely that the scheme will end before employers can absorb all furloughed workers, triggering a fresh spike in unemployment later this year.”
The figures are published on the same day that data from the CBI showed manufacturer output volumes in the three months to June fell at the fastest rate on record.
Yael Selfin, Chief Economist at KPMG UK, said: “The pandemic will leave a lasting mark on the economy. We all need to adjust to a new future, not just to the current recession, and make the most of the hand we’ve been dealt to build something better for us all.
“That could be doing more to help the environment, investing more in our essential workers, or matching our universities with local businesses to improve regional productivity.
“If we get this right, the future may well be a lot brighter.”