UK economy to contract by 11.3% in 2020
26th November 2020
Chancellor Rishi Sunak has announced the UK economy is set to contract by 11.3%, the highest fall in over 300 years, as a result of the COVID-19 pandemic.
In his November Spending Review, Sunak revealed the economy is predicted to grow by 5.5% in 2021, but economic output will not return to pre-COVID levels until the end of 2022, according to the Office for Budget Responsibility (OBR).
Sunak told MPs as restrictions are eased, the OBR expects the economy to start recovering, growing by 6.6% in 2022, then 2.3% in 2023, 1.7% in 2024 and 1.8% in 2025.
The Chancellor added that the UK is forecast to borrow a total of £394 billion this year, equivalent to 19% of GDP, as a result of the economic impact of the coronavirus.
Sunak said borrowing falls to £164bn next year, £105 billion in 2022-23, then remains at around £100 billion, or 4% of GDP, for the remainder of the forecast.
He revealed this is the highest recorded level of borrowing in our peacetime history.
In the review, the Chancellor also confirmed that the national living wage will increase to £8.91 per hour, an increase of 2.2%, resulting in a 19p rise per hour, which will come into effect from April next year.
He said this increase will also be extended to 23 and 24-year-olds, as previously the national living wage had only been available to those aged 25 or above.
Different rates apply to apprentices and those aged under 23.
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