The British economy is set for a painful slowdown due to a surge in coronavirus infections, which prompted Downing Street to impose fresh restrictions in parts of the country, Deutsche Bank economist Sanjay Raja said on Tuesday.
Speaking to MarketWatch, the economist said the UK was expected to grow 16 percent quarter-on-quarter in Q3 2020, but will slow to a crawl at 2 percent in the fourth quarter.
“As confidence weakens and uncertainty rises, we expect firms to continue to invest less and hire less. We also expect households to become more anxious about the broader economic outlook, in particular their own personal finances as job insecurity rises, pay cuts/freezes gain traction, and fiscal support is gradually reduced,” Raja said.
The news comes as the nations faces rising unemployment at 4.5 percent in August, with total worked hours in freefall 15 percent the same period, MarketWatch reported.
“With redundancies picking up to a post-GFC [global financial crisis] high, and the national furlough scheme slated to end in October, the likelihood of further job cuts remains high,” Raja added.
Chief UK economist at Bank of America, Robert Wood, also criticised the government decision to end the furlough scheme, stating that a lack of jobs rather than a lack of incentive to move jobs was a cause of concern.
"In our view winding down fiscal stimulus poses considerable downside risks to the economy,” he said in the report.
The news comes as UK struggles with a recession amid the ongoing COVID-19 pandemic as government ministers scramble to resolve shortfalls in furlough schemes backing firms, small and medium enterprises and waged workers.
Medical devices firm Johnson&Johnson paused Phase 3 trials of its COVID-19 vaccine on Tuesday after subjects reported illnesses, sending the British Pound and FTSE 100 lower by 0.58 percent and 0.50 percent, respectively.
UK prime minister Boris Johnson also revealed a three-tier system for tackling the ongoing outbreak in the country, where nearly 14,000 cases were reported on Monday. Over 620,000 cases and nearly 43,000 cases have been reported to date, according to data from the John Hopkins University of Medicine.