Europe Economy

UK economy could shrink by 35% between April and June, OBR says

A pedestrian walks past closed-down shops on an empty Regent Street in London on April 2, 2020, as life in Britain continues during the nationwide lockdown to combat the coronavirus pandemic.
Tolga Akmen

Britain's economy could shrink by 35% in the April to June period, and the unemployment rate could more than double to 10% due to the government's coronavirus shutdown, the country's independent budget forecasters said. 

The Office for Budget Responsibility said the budget deficit could hit 273 billion pounds ($342.23 billion) in the 2020/21 tax year, five times its previous estimate and equivalent to 14% of gross domestic product, its biggest since World War Two.

The projection was based on the assumption that the shutdown lasts for three months followed by another three-month period during which restrictions are partially lifted, the OBR said.

It said the economy could bounce back quickly after the plunge in the second quarter.

The OBR said public sector net debt could exceed 100% of gross domestic product during the 2020/21 financial year but end it at around 95% of GDP.

Before the crisis, the OBR had forecast debt would be 77% of GDP in 2020/21.