The third lockdown could cost the country £400 million every working day (Picture: PA / Getty / HM Treasury)
The UK is facing its first double dip recession in almost 50 years as a result of the third national lockdown in England.
Economists have warned borrowing for the 2020/2021 financial year could hit £450 billion and predict the latest coronavirus restrictions may cost the country £400 million every working day.
It comes as chancellor Rishi Sunak announced a new £4.6 billion plan to help businesses through the new lockdown, including one-off top-up grants of up to £9,000 for retail, hospitality and leisure venues.
But as a result experts said the UK will be living with high deficits for years as the country suffers a borrowing ‘hangover’.
Philip Rush, chief economist at consultant Heteronomics, told the Telegraph: ‘Borrowing looks to be ballooning to about £450bn in 2020/21.
‘Half a trillion is quite plausible if the Government steps in with new stimulus measures. I also expect a substantial upward revision in borrowing towards £250bn in 2021/22.’
Forecasting group Oxford Economics predicts business output is likely to shrink by more than 4% in the first three months of the year – £24.57 billion lower than it would have been without the lockdown.
And if the lockdown is lifted in mid-February – as prime minister Boris Johnson hopes – it will have cost the UK £390 million every working day, the Centre of Economics and Business Research predicts.
England has been plunged back into a third lockdown – and the economy is expected to suffer greatly (Picture: Reuters)
Economists have warned borrowing for the 2020/2021 financial year could hit £450 billion (Picture: Shutterstock / JMiks)
Forecasting group the EY Item Club had previously predicted gross domestic product (GDP) growth of 6.2% for 2021, but suggest it will now be around 5.5%.
Howard Archer, from the EY Item Club, said: ‘With restrictions now in place in most areas of the UK, the EY Item Club expects the economy will have a challenging start to 2021 and will likely see modest contraction in the first quarter.
‘This would result in a double dip recession.’
This would be the first double dip recession to hit the UK since 1975, when the banking sector was in crisis and there were a series of strikes across the country.
Chancellor Rishi Sunak announced a new £4.6 billion plan to help businesses through the new lockdown (Picture: HM Treasury)
A recession is defined as two consecutive quarters of economic contraction. The Covid-19 pandemic pulled the UK into its first recession for 11 years at the start of last year.
The country recovered slightly in the third quarter as lockdown restrictions were eased and Mr Sunak introduced the popular Eat Out To Help Out scheme to encourage people to spend.
But as the tier system came into place and a second lockdown was put in place in November, the economy began to shrink again in the final three months of 2020.
Last month, the Bank of England predicted a 1% decline for the final quarter of 2020, but Mr Archer suggests it could be closer to 2%.
And the third lockdown is expected to cause a further contraction in the first three months of 2021 – putting the UK back in recession.
By the end of the 2020/2021 financial year, the UK is expected to set the highest recorded level of borrowing in peacetime history.
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