UK economic growth is expected to slow sharply in 2020 amid disruption caused by the impact of coronavirus, according to the latest economic forecast from the British Chambers of Commerce.
The British Chambers of Commerce (BCC) has downgraded its UK GDP growth expectations for 2020 to 0.8%, from a previous forecast of 1%. Outside of the 2008/09 financial crisis, this would be the weakest full-year growth outturn since 1992 and down sharply from UK GDP growth of 1.4% in 2019.
UK GDP growth is then expected to pick up in subsequent years: to 1.4% in 2021 and 1.6% in 2022. The BCC forecast indicates that 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.
The disruptive impact of coronavirus is expected to weigh significantly on key drivers of UK GDP growth through the first half of 2020. A lack of clarity on the UK's future trading relationship with the EU and other partners around the world and a struggling global economy is also predicted to limit UK's near-term growth prospects.
The key forecasts are:
- UK export growth in 2020 is projected to be its weakest since 2009;
- Business investment is expected to contract by 0.7% this year;
- Growth in household spending in 2020 is predicted to be at its slowest since 2011.
On the upside, the Chambers has said that historically strong levels of government spending are expected to support the UK economy through the forecast period. The measures announced by the Bank of England, including lowering interest rates and steps to support business access to finance, will also help mitigate some of the impact of the coronavirus on the UK economy.
Adam Marshall, BCC director general, said: "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."
Suren Thiru, BCC head of economics, said: "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."
Written by Rachel Miller.