Britain is going to bear the brunt of Covid-19 as experts predict a double-digit slump in GDP. The Organisation for Economic Co-operation and Development said the UK is likely to be the hardest-hit by Covid-19 among major economies.
Britain’s economy is likely to slump by 11.5% in 2020, slightly outstripping falls in countries such as Germany, France, Spain and Italy, BBC reported. If there were a second peak in the pandemic, the UK economy could contract by 14%.
The OECD said that in what it called a “single-hit scenario”, with no second peak, there could be contractions of 11.4% in France, 11.1% in Spain, 11.3% in Italy and 6.6% in Germany.
In its latest assessment, the OECD found that the trade, tourism, and hospitality sectors, which make up large parts of the UK’s service-based economy, have suffered under lockdown restrictions introduced by the government.
The Paris-based organisation says that five years or more of income growth could be lost in many countries as a result of the pandemic.
Although the report says that the pandemic has started to recede in many countries, and activity has begun to pick up, it does not expect a convincing recovery. It sees the outlook for public health as extremely uncertain and that is reflected in the decision to assess two alternative scenarios.
In the more moderate scenario, the virus continues to gradually recede. In the alternative, there is a second wave of contagion which erupts later in 2020.
The report describes both outlooks as sobering. In neither can economic activity return to normal within the period the OECD considers. The deep recession now underway will be followed by a slow recovery. In the gloomier of the two possibilities, the decline this year could be very severe.
In that scenario two countries – France and Spain – would suffer even deeper declines in economic activity than the UK this year.
That 7.6% global forecast is significantly worse than what was foreseen by other agencies – such as the International Monetary Fund and the World Bank – who have warned about the high level of uncertainty attached to their forecasts.
By the end of 2021, the report says that five or more years of income growth could be lost in many countries. It says the impact on livelihoods will be especially severe among the most vulnerable groups.
The OECD also says the pandemic has accelerated the shift from what it calls “great integration” to “great fragmentation”. That is essentially a setback for globalisation, reflected in additional trade and investment restrictions and many borders that are closed at least while the health crisis persists.
In response to the OECD report, Chancellor Rishi Sunak said the UK was not the only one to suffer: “In common with many other economies around the world, we’re seeing the significant impact of coronavirus on our country and our economy.
“The unprecedented action we’ve taken to provide lifelines that help people and businesses through the economic disruption will ensure our economic recovery is as strong and as swift as possible.”
Britain will not extend its transitional links to the European Union (EU) beyond Dec. 31, a government minister said following the stalled talks between London and Brussels last week.
Penny Mordaunt, the British government’s postmaster general told the House of Commons (lower house of parliament) on Tuesday that to agree to an extension would just extend the negotiating period with the EU and prolong uncertainty, Xinhua news agency reported.
Mordaunt, updating lawmakers on the fourth round of talks between the British government and the EU, said there had been no progress on principle issues during last week’s talks.
“There are some very tough areas, one of them on fishing. We are asking for our (fishing) rights to be upheld and we are not wavering from that,” she said.
Britain ended its membership of the bloc on Jan. 31 but is still following EU rules during a transition period until Dec. 31 to enable a permanent future trade deal to be reached. During this period, Britain would have to pay into EU funds but have no say in laws imposed by Brussels.
Mordaunt resisted a number of calls from opposition MPs to extend the transition period by up to a year.
She said the government wanted to agree on a deal as early as possible to enable businesses to make preparations.
“We need to conclude the negotiations and get a good outcome to give our citizens and businesses to prepare for new border arrangements. The people of Britain do not want to go back to uncertainty, they want clarity,” she said, adding that a good deal is in the interests of both sides.
A report published Tuesday by think tank UK in a Changing Europe warned of the implications of going into 2021 without a Brexit deal on trade and future relationship issues, The Guardian newspaper reported.
Jonathan Portes, one of the authors, said: “COVID-19 pandemic and Brexit are major shocks for the UK economy. The interaction of the two is complex and unpredictable, with the potential to amplify some impacts while moderating others.”
“On balance, the pandemic probably does make the economic risks of exiting transition on January 2021 without a trade deal larger, but considerable uncertainties remain,” Portes said.