How much could real GDP fall in the UK during Q2 due to lockdown?

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UK Real GDP Could Plummet by 35 Per Cent in Second Quarter Amid Lockdown

In a scenario modelled by the Office for Budget Responsibility (OBR), the United Kingdom's real Gross Domestic Product (GDP) could experience a significant decline of 35 per cent during the second quarter of the year if a three-month coronavirus lockdown is implemented. This projection suggests that the annual GDP for 2020 could fall by 13 per cent, a figure that would surpass the economic contractions observed at the conclusion of both World Wars and during the 2008 financial crisis.
Significant Economic Contraction Projected

The OBR's scenario outlines a severe, albeit potentially short-lived, downturn. A 35 per cent contraction in real GDP in the second quarter is predicated on the continuation of lockdown measures for a three-month period. While the model anticipates a rebound once restrictions are eased, the immediate impact on the economy would be substantial. This projected annual fall of 13 per cent for 2020 represents a historic economic shock.
Unemployment Expected to Surge

Beyond GDP, the economic modelling also forecasts a sharp increase in unemployment. The OBR scenario suggests that unemployment could rise by over two million people, reaching a peak of 10 per cent in the second quarter. While some job recovery is expected, the pace of employment returning to pre-crisis levels is anticipated to lag behind the broader economic rebound.
Government Acknowledges Severe Impact

The gravity of the economic situation has been acknowledged by government officials. Finance minister Rishi Sunak stated that the OBR's study clearly indicated a "very significant impact on our economy" and warned of "hardship ahead." The government's response has included substantial public spending measures aimed at supporting businesses and individuals affected by the crisis, leading to a projected increase in government borrowing.
Borrowing and Debt Levels to Rise Sharply

The OBR's scenario foresees a substantial rise in government borrowing, with a net borrowing increase of £218 billion anticipated for 2020, equating to 14 per cent of GDP. This would represent the largest single-year deficit since the Second World War. Consequently, public sector net debt is projected to exceed 100 per cent of total economic output during the year, ending 2020 at an estimated 95 per cent. The OBR notes that government and Bank of England interventions may have a limited effect on mitigating output loss, as the decline is largely a byproduct of health measures impacting supply and demand.

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How much could real GDP fall in the UK during Q2 due to lockdown?

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