Lagging behind in the recovery race

The combination of a large share of the UK’s GDP being generated by the sectors that are hampered the most by social distancing and the drag from the uncertainty caused by Brexit means the UK economy will probably continue to lag behind its peers in the race to recover from the coronavirus crisis. The level of GDP may not return to its pre-crisis peak until the first half of 2022. By the end of 2022, the unemployment rate will probably still be at least 1 percentage point above the pre-crisis level of 4% and CPI inflation will probably be closer to 1% than the 2% target. That’s why we think the Bank of England will loosen policy by more than other forecasters anticipate. We expect quantitative easing to be expanded in a series of steps by further £250bn in total.