UK Economy Is Heading for Its Worst Crash in 300 Years

The UK economy is heading for its worst crash in more than 300 years because of the coronavirus pandemic, according to a new forecast from the Bank of England.

The central bank said Thursday that the British economy could shrink by 14% this year. That would be the biggest annual contraction since a decline of 15% in 1706, based on the bank’s own best estimate of historical data.

Governor Andrew Bailey said it would respond as necessary to support the economy as the coronavirus threat evolves, but stopped short of announcing any new stimulus measures.

In a report that examined the impact of the pandemic, the Bank of England said that GDP contracted by 3% in the first quarter of this year and would fall by as much as 25% in the second quarter, leaving the economy about 30% smaller than it was at the end of 2019. Unemployment is expected to increase to 9%.

The Bank of England has already taken some steps to counter the economic shock caused by weeks of lockdown measures and lost production, slashing interest rates to a record low in March and launching a £200 billion ($248 billion) bond buying program.

The UK government has meanwhile launched a rescue package that includes tax relief for businesses totaling £30 billion ($37 billion) and interest-free loans for up to 12 months. The government is also paying salaries for more than 6 million workers for an initial period of three months.

More action is likely to be taken in the coming months. Two members of the central bank’s monetary policy committee voted to pump another £100 billion ($124 billion) into the stimulus program, and outside economists expect other members to agree once the situation becomes clearer. If the coronavirus continues to spread, and the government is forced to extend or reintroduce lockdowns, much more than £100 billion could be needed.

Source: CNN