The UK’s economic downturn caused by the COVID-19 pandemic will be less severe than initially feared, according to the Bank of England. The UK economy looks on course for a 9.5% decline this year, compared with May’s forecast of a 14% annual contraction.

This would mark the biggest annual drop in a century, while the Bank said the UK faces a slower economic recovery from the coronavirus. In its first official forecast since the pandemic struck, the Bank said UK GDP is expected to have been more than 20% lower in Q2 2020 than in Q4 2019. But higher-frequency indicators imply that spending has recovered significantly since activity flatlined during lockdown in April.

Household consumption in July was less than 10% below its pre-coronavirus level at the start of the year. 

And surprisingly, housing market activity appears to have returned to close to normal levels, despite signs of a tightening in credit supply for some households.

Less evidence is available on business spending, but surveys suggest business investment is likely to have fallen markedly in Q2 2020. Afford Bond Director, Paul Edwards commented: “We are seeing some businesses bounce back after lockdown and are continuing to advise and support SME’s and entrepreneurs across the board – if you need help, let us know.”

Cheshire Chartered Accountants Afford Bond, have offices in Nantwich and Wilmslow, and provide full service accountancy support across the board.