Britain is set for the slowest economic bounce-back in the G7 and one of the slowest recoveries among wealthy nations, according to new forecasts published today by The Organisation for Economic Cooperation and Development.
The OECD has updated its forecasts for global economic recovery, showing a return to pre-Covid GDP levels by the end of next year. The central scenario estimates a 4.2 per cent fall in global GDP this year, matched by a 4.2 per cent lift next year - with a suggestion that its upside scenario becomes more likely if successful vaccines are rolled out at a relatively fast pace.
But while these latest forecasts bode better for the global economy, its findings deliver a blow to the UK. On some counts, the OECD's scenarios for Britain’s economic recovery are roughly on par with what the Office for Budget Responsibility published last week. On other counts, they are notably more pessimistic.
The OECD projects Britain’s economic output will fall by 11.2 per cent this year (0.1 less than the OBR), while both forecasts showing unemployment peaking at 7.5 per cent - roughly 2.5 million people - in 2021.
Even more jarring are the comparisons between the UK’s economic trajectory and the eighteen other countries forecast by the OECD. Britain’s economic contraction is found to be the second most severe - only exceeded by Argentina at 12.9 per cent. Its economic fall is more than double Canada or Germany, and nearly triple the contractions seen in Australia or the United States. While both the world economy and the G20 are respectively set to return to and exceed pre-Covid levels by Q4 2021, the UK is still estimated to be 7 per cent smaller by this time next year.
Today's updates from the OECD put into perspective - yet again - how badly the UK economy has fared from Covid-19 and subsequent lockdowns. While the UK's dependency on the services industries is thought to partially explain why it's taken such an economic hit, today's forecasts will likely lead to louder questions about the government's decisions to implement full lockdown measures for a second time. The OECD describes the UK as being at a 'historic and critical moment', both as it decides how to handle the pandemic over the winter months and gets down to the wire in the Brexit negotiations, which require a breakthrough imminently to see a deal secured between the UK and the EU. Indeed, decisions made in the coming days and weeks will have a huge impact the economy's prospects for recovery - but today's forecast remind us that the decisions already made have left us with implications for many years to come.