OECD predicts heavier Covid-19 impact on UK economy than European counterparts
The Organisation for Economic Co-operation and Development [OECD] has said that the UK economy is likely to recede by 11.5 per cent in 2020 due to Covid-19, a slightly worse prognosis than that which is expected for other major economies such as Germany, France, Spain and Italy.
The variable of a second spike in cases could see the UK economy shrink by 14 per cent.
Should a second peak not come to pass, the economies of France, Spain, Italy and Germany are expected to contract by 11.4 per cent, 11.1 per cent, 11.3 per cent, and 6.6 per cent respectively.
Addressing the OECD’s report, chancellor Rishi Sunak said: “In common with many other economies around the world, we're seeing the significant impact of coronavirus on our country and our economy.
"The unprecedented action we've taken to provide lifelines that help people and businesses through the economic disruption will ensure our economic recovery is as strong and as swift as possible."
The fact that the services sector is dominant within the UK economy has made it particularly vulnerable to the impact of lockdown, with the industry making up almost three-quarters of UK GDP.
The services sector in the UK covers financial services, but also hospitality and tourism which have been stricken by the pandemic.
Labour shadow chancellor Anneliese Dodds called the report’s findings “deeply worrying”.
Dodds said: "The government's failure to get on top of the health crisis, delay going into lockdown and chaotic mismanagement of the exit from lockdown are making the economic impact of this crisis worse."
Despite the numbers of new Covid-19 cases and deaths beginning to drop around the world, the OECD’s leading economist Laurence Boone said that the outbreak would have “dire and long-lasting consequences”.
Boone said: "Extraordinary policies will be required to walk the tightrope towards recovery. Even if growth does surge in some sectors, overall activity will remain muted for a while."
In the worst-case scenario of a second spike in cases, the OECD predicts that the global economy could contract by as much as 7.6 per cent over 2020, which goes even beyond the forecasts of the International Monetary Fund and World Bank.
Under the second wave scenario, the outlook for France and Spain would also worsen, with their economies then in line to shrink at a greater rate than that of the UK.
The report suggests that around five years’ worth of income growth, or more, could be lost for a number of nations.