Bank says Britain is in the midst of the biggest economic contraction in over 300 years 7 May 2020 The Bank of England’s first official take on the economic impact of coronavirus suggests that Britain is in the midst of the biggest economic contraction in over 300 years, and that even a rapid recovery will leave a longer-term legacy of high unemployment, the Resolution Foundation said today (Thursday) in response to the Bank’s Monetary Policy Report. The Foundation notes that the Bank’s scenario of the economy shrinking by 14 per cent this year would mean the biggest economic contraction since 1706. That 14 per cent hit to the economy is equivalent to around £300 billion, or £9,000 for every family in Britain, and shows why the Bank and Government are right to have protected households as much as possible with policies such as the Job Retention Scheme. While the Bank’s scenario implies the UK economy will return towards its pre-pandemic growth path in 2021, it projects unemployment to remain above its pre-pandemic path until at least 2023 – after reaching a 25-year high of 9 per cent this year. The Foundation says this shows that even if the economy recovers rapidly, Britain will be living with high unemployment for some time, and that policy makers will need to take a more active approach towards supporting people back in to work. James Smith, Research Director at the Resolution Foundation, said: “The Bank’s first take on the economic impact of coronavirus points to a sobering £300 billion shrinking in the size of the economy, and the biggest economic contraction in over 300 years. “Faced with this huge economic hit, both the Bank and the Government have made the right call in taking bold action to protect firms and families as much as possible. “The Bank’s scenario points to a fairly rapid recovery. But even if this were to materialise – and it is certainly not guaranteed – Britain is likely to be living with a legacy of high unemployment for some years to come.”
