GDP to remain low until 2024, experts predict

It could take half a decade for a key measure of the UK’s economy to get back to where it was before the onset of coronavirus, new figures have suggested.

Experts at big four consultancy EY said that they expect gross domestic product (GDP) to remain below where it was in 2019 until 2024, dealing a blow to hopes of a rapid recovery.

The consultancy’s experts believe that GDP will contract by 11.5% this year in the UK, well worse than the 8% they predicted just a month ago.

It will then bounce back to notch up 6.5% growth in 2021.

Howard Archer, chief economic adviser to the EY Item Club, said: “Even though lockdown restrictions are easing, consumer caution has been much more pronounced than expected.”

“We believe that consumer confidence is one of three key factors likely to weigh on the UK economy over the rest of the year, alongside the impact of rising unemployment and low levels of business investment.”

“The UK economy may be past its low point but it is looking increasingly likely that the climb back is going to be a lot longer than expected.

“May’s growth undershot even the lowest forecasts.

“By the middle of this year, the economy was a fifth smaller than it was at the start.

“Such a fall creates more room for rapid growth later, but it will be from a much lower base.”

Under the high-level numbers the economic contraction will have a serious impact on households up and down the country, with employment set to double according to EY.

It forecasts a 3.9% point jump to 9% of the population being unemployed at the of of this year and the beginning of next.

It is a fear shared by many in the government.

The Treasury has promises to pay £1,000 per employee for businesses who bring back furloughed staff to work.

Mr Archer said: “The labour market’s performance is key to the economy’s prospects over both the short term and further out.

“Job losses and poor real wage growth are expected to hold back consumer spending, although the Chancellor’s instinct to focus on jobs in his Summer Statement should provide some support.

“It is possible that the Chancellor will look to provide further help for the labour market in this autumn’s budget.”