The UK economy is ‘unlikely’ to reach its pre-Covid level until early 2023, according to new forecasts by KPMG.
Its latest economic quarterly economic report suggests the country’s GDP will plunge 10.3% for the year, downgraded from the 7.2% predicted in June.
Economic growth is expected to pick up at 8.4% in 2021, if a vaccine is approved in January and the UK agrees an exit deal with the EU.
However, a second lockdown of even just four weeks could see GDP decline a further 12.6% this year, according to the firm.
The unemployment rate is expected to spike as the Job Retention Scheme is rolled back, rising to 9% in the fourth quarter, averaging 5.9% for this year and 8.2% in 2021.
Yael Selfin, chief economist at KPMG UK, said ‘‘While it feels like the worst of the COVID-induced economic crisis is behind us, there are still many challenges.
“There could be a second wave of infection this year, although we expect any future lockdown to be less severe – and the timing and speed of the economic recovery will be impacted both by vaccine developments and Brexit outcomes.”
She added: ‘‘The pandemic has had a more significant impact on sectors that are more labour-intensive – and the recession will generate permanent change in some of them, meaning there will be a bigger effect on the labour market than the fall in GDP would imply.
‘‘The government has an important role to play. Not just in continuing to provide short-term support to the economy but in readying the UK for a more productive future, including upskilling a significant part of the workforce and upgrading the UK’s telecommunications network. If we get this right, we could come out of this crisis with a better economy.”