The Bank of England has warned that the UK economy is heading towards its sharpest recession on record.
The coronavirus impact would see the economy shrink 14% this year, based on the lockdown being relaxed in June.
Scenarios drawn up by the Bank to illustrate the economic impact said Covid-19 was “dramatically reducing jobs and incomes in the UK”.
Bank governor Andrew Bailey told the BBC there would be no quick return to normality.
He described the downturn as “unprecedented”, and said consumers would remain cautious even when lockdown restrictions are lifted.
Mr Bailey said: “Not all of the economic activity comes back. There’s quite a sharp recovery. But we’ve also factored that people will be cautious of their own choice.
“They don’t re-engage fully, and so it’s really only until next summer that activity comes fully back.”
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The UK government is expected to start easing lockdown restrictions next week.
The Bank stressed that the outlook for the economy was “unusually uncertain” at present and would depend on how households and businesses responded to the pandemic.
It also assumes:
- The government’s jobs retention scheme covering 80% of wages is phased out with the lockdown.
- Companies stop or scale back their operations for some time.
- Cautious consumers voluntarily maintain social distancing until mid-2021.
