UK economy has recovered ‘roughly half’ of COVID-19 hit

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The Bank of England’s chief economist has told MPs the UK economy has recovered “roughly half” of its massive hit from the coronavirus crisis.

Andy Haldane said business surveys and other data suggested output was recovering at a rate of 1% a week following the dark days of the full lockdown – imposed on the economy in March – to limit the spread of COVID-19.

Mr Haldane, who was the only member of the Bank’s rate-setting committee to vote against an expansion of its coronavirus asset purchase programme last month, made his remarks in evidence to the House of Commons’ Treasury Select Committee.

The coronavirus lockdown effects are due to tip the UK into its sharpest recession for many generations.

Official figures, compiled by the Office for National Statistics, have shown a negative performance for the first quarter of the year – tipped by a 5.8% fall in March as the crisis gathered pace.

Gross domestic product (GDP) has since crumbled by 20.4% in April and by 19.1% in May.

A recession, which is defined by two consecutive quarters of negative growth, will be confirmed when GDP figures for June are released next month.

Gita Gopinath, IMF Chief Economist and Director of the Research Department, speaks at a briefing during the IMF and World Bank Fall Meetings on October 15, 2019 in Washington, DC.

Mr Haldane said he believed the UK’s jobless rate, currently at 3.9% in the most recent official figures covering the three months to May, was more likely at around 6% currently.

He also reiterated an earlier warning that unemployment could rise to its highest since the mid-1980s as demand for retail and hospitality workers has diminished.

The scheme was introduced to protect jobs

Mr Haldane repeated that while the Bank was examining the potential effects of taking interest rates into negative territory in a bid to boost economic activity, it would not necessarily do so.

“There is also work underway on other potential instruments available to the MPC (Monetary Policy Committee) – for example, further rounds of QE (quantitative easing), credit-easing policies and forward guidance,” he said.

The Bank is due to make its next interest rate decision on 6 August at the same time as its quarterly monetary policy report is published.