Coronavirus: UK economy 'could shrink by record 35%' by June

Britain’s independent tax and spending watchdog has warned the coronavirus pandemic could trigger a record 35% drop in UK growth by June.

The Office for Budget Responsibility said that this was based on an assumption that the current lockdown would last for three months.

Under this scenario, unemployment would hit 10%, from its current 3.9% rate.

However, once restrictions were lifted, the OBR said it expects growth to recover quickly with no lasting damage.

The OBR outlined the potential hit to the economy and public finances in a special report on Tuesday.

It said a three-month lockdown followed by three months of partial restrictions would push up Britain’s borrowing bill to an estimated £273bn this financial year, or 14% of gross domestic product (GDP).

This would represent the largest deficit as a share of GDP since World War II.

While borrowing is expected to jump, the OBR said the government’s unprecedented financial help for workers and businesses would help to limit any long-term damage.

It expects half of the sharp drop in economic growth in the second quarter to be reversed in the three months to September.

While the UK economy is expected to contract by 13% for the year as a whole, the UK is expected to get back to its pre-crisis growth trend by the end of 2020.