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KPMG predicts UK economy will recover from Covid-19 in 2021

Mar 31
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KPMG predicts UK economy will recover from Covid-19 in...

The outbreak of coronavirus - and the resulting illness Covid-19 - in the UK and around the world is already having a huge economic impact, with many businesses being forced to close and huge sections of the labour force unable to work as normal.

In its analysis of the current situation, KPMG said the British economy has come to a "temporary standstill", but is likely to return to growth in 2021.

The firm predicted that, assuming the pandemic is largely contained by the summer, UK GDP will decline by 2.6% this year, after which there will be a "sharp recovery" as the uncertainty caused by the outbreak begins to dissipate.

If the worst effects of Covid-19 continue to be felt into the summer and beyond, however, the economy could shrink by 5.4% this year. This would be a more severe contraction than that witnessed during the 2008-09 financial crisis.

Even in this extreme scenario, KPMG forecast that the economy would recover by the second half of 2021.

Yael Selfin, chief economist at KPMG UK, stressed that the Covid-19 pandemic is "first and foremost a human crisis", but there will also be a "substantial negative impact" on the British and global economy.

"But the economy is expected to recover by the second half of 2021," she added.

"Until we know how and when the Covid-19 outbreak will end, the scale of the negative economic impact will be difficult to quantify. However, it is now almost certain that the UK is slipping into its first significant downturn in over a decade."

According to Blair Nimmo, head of restructuring for KPMG in the UK, one of the most important things business directors should be doing at this time is contingency planning.

"Forecasting, cash preservation, engaging with funders and other stakeholders and accessing government support initiatives all need to be at the top of the to-do list," he said.

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