Private sector forecasts for the UK economy continue to worsen, with economists now the most pessimistic about the outlook for Britain since the coronavirus pandemic began.
Forecasts compiled by the government and published on Wednesday show the average prediction for UK GDP this year is now -10.1%. Unemployment is expected to hit 8.3% by the end of the year.
The economy is expected to rebound by only 6.5% in 2021, with unemployment remaining at 6.6% by the end of next year.
The consensus forecasts are based on 18 new predictions made by private sector bodies between 3 August and 13 August. They include banks like Barclays and Morgan Stanley, as well as think tanks and research agencies such as Oxford Economics.
Last week Deutsche Bank and Barclays both downgraded their forecasts in the wake of second quarter GDP data that showed the UK economy shrank by 20.4% between April and June.
“A resurgence in COVID-19 caseloads and Brexit risks are additional factors suggesting the UK economy could underperform its peers,” Barclays economists Fabrice Montagne and Abbas Khan wrote in a note last week. “Additional policy support now appears inevitable.”
HSBC followed suit on Wednesday, downgrading its forecast from a 7.8% contraction to a 10.3% slump.
“Unlike BoE Chief economist Andy Haldane, who thinks it is now time to see the economic glass as 'half-full', recent data outturns have made us more pessimistic about the lasting economic impact,” HSBC senior economist Elizabeth Martins wrote on Wednesday.
The figures published by the government on Wednesday do not include HSBC’s latest forecast, suggesting September’s report may be even worse.
August’s consensus figures already mark the worst outlook for UK GDP and unemployment since the COVID-19 pandemic began, surpassing June’s previous low point.
“The economy's high reliance on consumer services and the impending withdrawal of government support for the labour market suggests that the level of GDP will track a lower path than in most other economies going forwards,” Samuel Tombs, chief UK economist at Pantheon Macroeconomics, wrote in a note on Wednesday.
August’s private sector consensus is worse than the Bank of England’s analysis. The central bank said at the start of August it expects the UK economy to contract by 9.5% this year, which would be the worse collapse in a century.
In February, before the coronavirus struck, private sector economists said they expected the UK economy to grow by 1.2% in 2020.