Dean Turner, economist at UBS Global Wealth Management: “The UK is officially in recession, and the slump in the first six months of the year is worse than most of its peers. However, the monthly data already shows that the worst is behind us for the economy. GDP numbers for June show a strong bounce in activity as the economy emerged from lockdown.
“We expect pent-up consumer demand to drive a strong recovery in the third quarter, although this momentum will gradually fade as the outlook for the labour market deteriorates. The UK economy is unlikely to return to its pre-crisis level before the end of next year.”
James Smith, developed markets economist at ING: “Rising unemployment is probably the biggest threat to the recovery at the moment, and this is being linked to the gradual unwinding of the government’s furlough scheme over the next few months. Many firms, particularly in the hardest-hit hospitality/recreation sectors are still struggling as a result of ongoing consumer caution and social distancing constraints.
“Investment is also likely to remain a major drag, particularly in light of the forthcoming changes at the end of the post-Brexit transition period. Even if there is a trade deal agreed this year, businesses will encounter a wave of new costs across a range of sectors.
“We'd note that the sectors likely to be most heavily affected (eg manufacturing) by these changes are not necessarily going to be the same as those hardest hit so far by the Covid-19 crisis (which has most severely hit consumer services). For 2020 as a whole, we expect the UK economy to have shrunk by 9.7%.”
