The Bank of England today painted a very gloomy picture of the UK economy, with a halving in business investment, a near halving in business sales, a sharp rise in unemployment and households cutting their spending by a third.
The outlook for GDP is also bleak in the short term, with a 30% fall in the second quarter of this year compared to the end of 2019. Thanks in part to the fall in the oil price, inflation is set to fall below 1% this summer and remain around that level for the rest of the year.
“The Bank is still fairly confident of its projections of a V-shaped recovery, with economic activity picking up ‘relatively rapidly’ once social distancing measures are relaxed.
“However, it depends how they are relaxed, what businesses can open up first, how quickly they start spending and how much the public remains wary of going out and spending their money. All eyes will be on Boris Johnson’s announcement on Sunday to help determine whether we exit this downturn quickly or at a more sluggish pace.
Laura Suter from AJ Bell said: “Savers who have been battered by a series of cuts to rates can see no bright spot on the horizon as the Bank maintains interest rates at the unprecedented low of 0.1% and there’s no sign of them shifting upwards.
“Banks and building societies have been quick to slash rates, but so far there has been little respite for borrowers. With more people taking on more debt in order to get through the current crisis, many will be hoping that sustained low interest rates will provide some breathing space for those with debt.