The recent increase in coronavirus cases and subsequent tightening of restrictions are expected to at least put the UK’s economic recovery “on hold for a while”, according to the country’s fiscal watchdog.
Economists from the Office for Budget Responsibility (OBR) told MPs at the Treasury Select Committee that some signs of growth from after the lockdown was first eased had now “flattened off”.
Sir Charlie Bean, from the OBR’s budget responsibility committee, said the economic recovery had slowed since the Bank of England’s chief economist Andy Haldane said there was a V-shaped rebound in July.
Prof. Sir Charlie Bean from @OBR_UK told us that the economic recovery looked V-shaped until the start of the autumn.
But the resurgence of cases and potential further lockdown measures is, at a minimum, going to put the recovery on hold for a while. pic.twitter.com/1oRn5loOa3
— Treasury Committee (@CommonsTreasury) October 7, 2020
“After Andy Haldane said it was ‘so far so V’, it’s reasonable to think that, at a minimum, recent changes will put recovery on hold for a while, although this depends on the course of the virus itself,” Mr Bean said.
The economist said there was initially “good news” over the pace of the economic growth as lockdown measures were relaxed.
He said the recovery looked “pretty much” like the watchdog’s upside scenario “up until the autumn”, when some restrictions were tightened again.
Mr Bean told the committee: “I’m not an epidemiologist, but a large part will depend on non-pharmaceutical interventions the Government makes.
“It will also depend on how individuals, consumers and businesses respond.
“You certainly might expect that with heightened risk of catching it, people will be more wary of going to shops, bars, restaurants, even if open, so I think it is reasonable to suggest that there will be some hiatus in the recovery.
“How long and how potentially deep that hiatus is, we don’t know, but I think it is very difficult to know at this stage until we know how effective are any measures to bring that resurgence back under control.”
Meanwhile, chairman of the OBR, Richard Hughes, told MPs that the summer economic update and winter economic plan announced by the Chancellor had both helped to manage the risks of the pandemic on the economy.
But he also called on the Government to provide a more substantive response to the OBR’s latest fiscal risk report when the economy “returns to some sort of normality”.