This report by EY ITEM Club says the economy can only return to its full potential once the virus has been eliminated, a vaccine has been developed or a mitigating treatment has been shown to significantly reduce the risk from contracting COVID-19.
In a consumer-centric economy like the UK, reluctant consumers will limit the level of economic activity even with a shift to online.
Key points include:
UK GDP has contracted 11.5 percent in 2020. This is a substantially deeper drop than the 8.0 percent fall anticipated in early June.
The economy is expected to return to growth in Q3 2020. The substantial fiscal and monetary stimulus that has been enacted by HM Treasury and the Bank of England should provide serious support to activity as restrictions are eased.
The massive fiscal support that the UK Government is providing to the economy, businesses and jobs means the budget deficit, measured in terms of public sector net borrowing excluding banks (PSNBex), is likely to reach £335bn in 2020/21.