The UK’s budget watchdog has revised sharply higher its projections for the cost of the government’s response to the coronavirus crisis and warned the country remains on track for its worst economic slump in 300 years.
The Office for Budget Responsibility (OBR) said it now expected the chancellor’s support programmes for the economy – bolstered by Rishi Sunak’s summer statement last week – to cost £192.3bn.
That was up from the £132.5bn figure it forecast the previous month.
The OBR, which is independent of government, published the figure alongside a set of scenarios it had created to measure the potential hit to the economy and public finances over the medium term from COVID-19.
They suggested UK output could shrink by up to 14.3% this year, in the worst case, with the economy not recovering to pre-crisis levels until 2024.
Even under its most optimistic scenario, the OBR sees gross domestic product (GDP) declining by 10.6% this year – the worst performance for 300 years.
The central scenario saw 2020 output falling by 12.4%, with the jobless rate peaking at 11.4%. It currently stands at 3.9%.
Crucially, the OBR said its economic scenarios did not take into account the effects of the additional measures announced by the chancellor last week.
The budget body said they would have had a “material effect” on its findings but came in too late to be included in Tuesday’s report.
Its findings were released just hours after official figures showed the economy remained a quarter below pre-crisis levels in May amid a tepid fightback from lockdown measures.
Manufacturing and online retail accounted for the improvement.
The OBR said it expected a 21% fall in output during the second quarter.
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