United Kingdom Economic Forecast

UK Economic Forecast

September 1, 2020

The economy contracted at a record rate in Q2 due to collapses in private consumption and investment amid the prolonged domestic lockdown, while plummeting imports meant the external sector contributed positively to GDP. That said, activity rebounded in June on the lifting of some restrictions, and this momentum continued into Q3. Both the manufacturing and service sectors strengthened in July and August according to PMI data, amid stronger output and new orders. Less positively, the labor market remains soft, with 730,000 jobs lost between March and July, and millions of workers still temporarily away from work. Moreover, the government’s decision not to extend its wage subsidy scheme beyond October could result in a marked deterioration of the labor market, hampering the recovery ahead.

United Kingdom Economic Growth

Activity will plummet this year, as Covid-19 containment measures hit demand. However, fiscal and monetary support should cushion the downturn somewhat. A likely significant rise in the unemployment rate once the wage subsidy scheme ends, a possible reintroduction of restrictive measures and Brexit uncertainty pose downside risks. FocusEconomics panelists project GDP to contract 9.4% in 2020, which is down 0.4 percentage points from last month’s forecast, and to expand 6.3% in 2021.

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United Kingdom Facts

Value Change Date
Bond Yield0.83-3.04 %Jan 01
Exchange Rate1.33-0.35 %Jan 01

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