The UK economy will grow slower than expected due to the impact of the Coronavirus outbreak, but will avoid a recession, according to the British Chambers of Commerce (BCC).
The organisation’s latest economic forecast suggests the economy will grow by 0.8% in 2020, down from earlier expectations of 1.0%, which would be the slowest growth since 1992, excluding the financial crisis.
The BCC said the impact of Coronavirus is expected to “weigh significantly on key drivers of UK GDP growth through the first half of 2020”. It also warned that ongoing uncertainty surrounding the UK’s future trading relationship with the EU – an almost forgotten issue in recent weeks – will limit growth prospects in the short-term.
There is some cause for optimism, with the BCC expectation growth to pick up to 1.4% in 2021 and 1.6% in 2022. However, by the end of 2022, the UK economy will have grown below its historic average growth rate of 2.6% for eight successive years, the longest period since records began.
Suren Thiru, head of economics at the British Chambers of Commerce, said: “Our latest forecast indicates that the UK economy faces a challenging short-term outlook.
“It is increasingly likely that the boost from higher government spending and more political certainty, will be surpassed over the near-term by the negative impact of Coronavirus on the UK economy.
“Although the scale and impact of Coronavirus remains highly uncertain, early evidence of disruption to supply chains and weakening in consumer demand and business activity could mean that even in the case of a temporary shock to the economy, there may be some long-term impact on economic output – particularly if significant action is needed to combat its spread.
“Failure to achieve a UK-EU arrangement conducive to trade is also a key risk to the outlook for the UK economy as disruption in early 2021 could adversely affect economic conditions.”
Adam Marshall, director general of the British Chambers of Commerce, added: “Coronavirus could further weaken an already stagnant UK economy, as many businesses are starting to report an impact on their cashflow and growth prospects.”
“The Chancellor and the Bank of England have responded to the immediate challenge with measures to help firms hit by Coronavirus, and they must now ensure this support gets to businesses as quickly as possible.
“More will need to be done later in the year to boost business confidence and tackle prolonged economic stagnation. Securing new trading arrangements, taking real action to reduce the high upfront costs of doing business and putting spades in the ground on long-overdue infrastructure projects must be prioritised in order to secure our long-term economic prospects.”