UK think tank, NIESR, comments on the UK economy
- Sees unemployment rate hitting almost 10% this year due to “premature” end to the government’s furlough program
- Says government is making a mistake by cutting furlough program in October
- Says that increases the risks of economic scarring
- Forecasts UK economy to shrink by 10.1% in 2020, before growing by 6.1% in 2021
That is one take on the whole situation but if the health crisis gets worse in the coming months, who is to say that the UK government would not use that as an excuse to keep the furlough program running until the year-end.
For now, a lot about UK economic data – especially in relation to the labour market – is largely masked by the fact that the government’s furlough program is in place.
We will only get a better idea of how the economy is standing on its own two feet once the program expires. Things may be looking “good” for now but should there be substantial layoffs to come, it could lead to a bigger hit to the economy down the road.