Think-tank warns over £575 yearly blow to households after ‘grim’ forecast

Every household will suffer a £575 annual blow due to the slump in the economic growth forecast, even before the impact of the coronavirus is factored in, a respected think-tank has warned.

The Resolution Foundation said the GDP markdown from the Office for Budget Responsibility (OBR) financial watchdog was both “incredibly grim and yet still unbelievably optimistic”.

Chancellor Rishi Sunak used his Budget to inject £30 billion in supporting the economy and softening the blow of the Covid-19 sickness ahead of the Government’s expected ramping up of measures on Thursday.

The OBR warned that a “recession this year is quite possible” if the virus causes “widespread economic disruption”, and predicted falling growth even before the coronavirus impact is reflected.

In its overnight assessment, the Resolution Foundation living standards think-tank delivered a stark warning over the OBR assessment, warning of “more difficult budgets ahead” for the Chancellor.

Chief executive Torsten Bell said: “The OBR managed to deliver an incredibly grim, and yet still unbelievably optimistic, pre-pandemic markdown to the UK’s economic outlook – dealing a £600 a year hit to every household in Britain.

PA Graphic
PA Graphic

“In reality, once we take the economic impact of coronavirus into account, this is the weakest official growth outlook on record.

“And having finally returned to peak pay this year, real wage growth is set to weaken every year of the forecast period.”

Before the impact of coronavirus is seen, growth was expected to fall to 1.1% in 2020, down from 1.2% last year and dramatically lower than the OBR’s previous estimate of 1.4%.