Comment: Bank of England warns of deepest recession on record

Following the Bank of England’s warning this morning that the UK economy is edging to its deepest recession due to Covid-19, Markus Kuger, Chief Economist at commercial data and analytics firm, Dun & Bradstreet, said: “Dun & Bradstreet’s analysis supports the Bank of England’s gloomy outlook for 2020 and shows that the economy has already slowed severely, especially in sectors like tourism, hospitality, aviation and entertainment. Data points towards a significant GDP contraction in the second quarter and beyond. Factors such as the impact of stringent lockdown measures on the workforce, disruption to supply chains, lower investment and a more challenging credit environment indicate that we’re due to experience the worst recession on record.

“While the fiscal stimulus packages will mitigate some of the adverse effects on the labour market, they will also lead to a significantly increased fiscal deficit in 2020. Dun & Bradstreet expects the government deficit to increase significantly and we are likely to see a marked rise in unemployment after several years of relatively low figures.

“The UK is not the only economy facing such a challenging outlook. Dun & Bradstreet’s Country Insight Team has downgraded ratings for over 100 countries since late January 2020: with the UK rating downgraded by two quartiles taking it from a ’low risk’ country to being classed as a ‘medium risk’ state. Our risk rating trend for the UK has shifted to ‘deteriorating rapidly’, indicating that further downgrades are possible.”