Households expect Britain to fall into recession this year, with some even predicting a more severe depression, as parts of the economy remain grounded.
Concerns about economic growth, rising unemployment and impending business failures have knocked consumer confidence to its weakest level since 2013, according to an index published by YouGov and the Centre for Economics and Business Research.
The index fell by 4.2 points to 103.3, the biggest monthly fall since the wake of the Brexit referendum in July 2016 and the lowest level since 2013. It is only three points above the 100 mark separating optimism from pessimism.
The outlook has deteriorated sharply in only a few weeks, with the coronavirus crisis closing off large parts of the economy. Britons began the year riding a wave of optimism after December’s decisive general election result, but now nearly three quarters of households expect a recession this year and almost a fifth believe that the country will fall into a more prolonged and enduring depression, according to the survey.
Economists are warning that Britain is on the verge of an unprecedented collapse in economic growth. The Centre for Economics and Business Research said that GDP would fall by about 15 per cent in the second quarter of the year before recovering in the third quarter.
Shop closures and rising unemployment are set to knock consumption by about 15 per cent on the quarter, while business investment will sink by 13 per cent over the year. “The UK economy is about to enter the deepest recession since the financial crisis, including the steepest quarter-on-quarter decline in economic activity since comparable records began,” the think tank said.
Although the government has launched a substantial package of measures to support businesses and workers, the survey indicated that they have done little to improve consumer confidence. The responses were collated in the first three weeks of March, as the government was beginning to roll out its emergency measures, including a job retention scheme that will pay 80 per cent of the salaries of furloughed workers.
Confidence deteriorated across the board, with households turning more negative on jobs, house prices and personal finances. Nearly 60 per cent of respondents believe that unemployment will rise this year, with 15 per cent saying that it will climb substantially. The outlook for house prices fell by six points to 109.4, while the gauge for household finances fell deeper into negative territory at 91.9.
Kay Neufeld, head of macroeconomics at the Centre for Economics and Business Research, said: “It is now highly likely that the economic crisis will lead to an increase in unemployment and a reduction in household incomes in the coming months.”