UK GDP is set to shrink between 11-12% in 2020, according to research carried out by PwC.
In a report published today (1 October) by the firm, the economy, including hard-hit sectors such as retail and hospitality, will return to a growth of around 10% or 4% in 2021.
PwC predicts there will be a sharp increase in the 2020/21 budget deficit to around £380bn to £430bn, however expects this to be reversed as the economy recovers.
The firm recommended ‘‘some long-term fiscal tightening’’ to mitigate this rise, as the deficit remains above the 3% of GDP ceiling implied by current fiscal rules
Jing Teow, senior economist at PwC, said: ‘‘Uncertainty over the economic outlook and job security, as well as the desire for more precautionary savings, mean that it will take time to recover to normality, even once economies are fully open, although a recovery in 2021 could be buoyed if there is a vaccine.
‘‘The Government’s new measures to support skills for those out of work are sorts of interventions that may limit longer-term scarring on employment.”
She added: “For businesses, too, uncertainty over the outlook, potential overcapacity – especially in structurally challenged sectors such as air travel and tourism – as well as higher debt levels as a result of necessary crisis survival measures, could impact innovation and future productivity growth.
‘‘However, with more money available once recovery has been achieved, a deals-led recovery is likely, with investment opportunities available for savvy businesses.’’