The shrink in the UK’s economy is predicted to be less severe than first feared but could take longer to recover than previously predicted.
That’s the view of the Bank of England with said the economy shrank by more than 20 per cent in the first half of the year after taking a significant hit from the coronavirus pandemic.
The bank improved its ‘indicative projection’ for growth in the economy, forecasting that GDP will shrink by 9.5 per cent this year, following government action aimed at protecting the economy.
In May, the bank had warned that GDP could slump by 14 per cent this year but warned that the economy’s recovery could now be slower and won’t reach pre-virus levels until the end of 2021.
The bank has previously said it thought GDP may recover to its pre-virus size by the second quarter of 2021.
The current quantitative easing programme of £745bn will remain in place and rates are likely to be held.
It also forecast that unemployment will jump, with the rate at 7.5 per cent at the end of 2020, before gradually declining from the start of next year.
The value of the pound picked up against the dollar after traders welcomed the decision to hold rates.
Fiona Cincotta, analyst at Gain Capital, said: ‘The Bank of England was considerably more upbeat about the recovery than had been expected.
‘Upwardly revised growth forecasts, a more rapid recovery than initially feared and no tilting towards negative rates at this time has sent sterling surging towards 1.32 US dollars.’
- Got a beef with your car manufacturer? Love your suppliers? Tell us why in our Car Dealer Power survey here.
- Get the latest news updates in our WhatsApp group. Broadcast only, headlines direct to your phone. Send us a message and ask to join here.
- There’s a fresh new design and exclusive content for Car Dealer! Download issue 149 for free here.