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UK economy may not fully recover 'until 2023'

Lucy Harley-McKeown
·2-min read
PwC predicts an economic contraction of 5.7%, as new lockdown measures across the UK take their toll on the economy. Photo: Jimin Lai/AFP via Getty Images
PwC predicts an economic contraction of 5.7%, as new lockdown measures across the UK take their toll on the economy. Photo: Jimin Lai/AFP via Getty Images

The UK economy is expected to end the year with negative quarterly growth for the fourth quarter of between -2.1% and -3.3%, with annual GDP growth likely to be between -11.2% and -11.4% in 2020.

That’s according to a new analysis by professional services firm PricewaterhouseCoopers (PwC). The research also predicts that in 2021 GDP growth will range between 6.0% and 3.4%, depending on the success of the vaccine rollout and whether the UK can secure a trade deal with the EU.

Alongside this, it says that UK economic output may return to pre-crisis levels by the third quarter of 2022, with the caveat that recovery could take until the end of 2023 if there are prolonged lockdown measures.

In November alone, PwC predicts an economic contraction of 5.7%, as new lockdown measures across the UK take their toll on the economy. This will be followed by a marginal recovery of 0.3% in December, the report said.

READ MORE: UK economic recovery goes into reverse as lockdowns batter firms

Jonathan Gillham, chief economist at PwC, said: “After a double dip, the economy should begin to rev up at the start of next year. While we initially anticipated that recovery would resemble a swoosh, we now envisage it being more of a W shape – albeit with a much smaller second drop.

“Although we expect a boost to economic activity as vaccines progress and confidence builds in the first half of 2021, the longer term outlook will very much depend on the nature and duration of further restriction measures and the outcomes of the UK-EU trade negotiation, which could weigh on growth,” he said.

The research stacks up with industry data released yesterday that showed the UK’s economic recovery is facing a ‘double-dip’ downturn as coronavirus lockdowns batter firms.

The purchasing managers’ index (PMI) data, one of the most closely watched indicators on the health of the UK economy, showed overall activity declining for the first time in months.

Watch: What is a V-shaped economic recovery?