Bank of England warns of worst recession on record
The Bank of England has warned that the country is heading towards the deepest recession on record with the economy expected to shrink by 14% this year.
Threadneedle Street published a scenario to illustrate the economic impact of COVID-19 which it said was “dramatically reducing jobs and incomes in the UK”.
The scenario showed the economy shrinking by 2.9% in the first quarter of 2020 before a 25% decline in the three months to June.
This would push the country into a recession which is defined as two consecutive quarters of economic decline.
However, the central bank said it is confident that banks can ride out the COVID-19 pandemic and help UK households.
The Bank said: “Businesses and households will need to borrow to get through this period. We want banks and building societies to expand lending. We have tested the major UK banks.
“They are strong enough to keep lending, which will support the economy and limit losses to themselves.
“We are offering more long-term funding to banks that increase their lending.
“In particular, we will give extra funding to banks that offer more lending to small and medium-sized companies. These firms often need more support in times like these.”
Once the pandemic is over the UK is expected to come back quickly.
Projections anticipate a 15% rebound in 2021.
You can watch the Monetary Policy Report and interim Financial Stability Report for May 2020 below.