Britain’s economy is heading for the worst annual contraction of the modern era, and one of the worst drops in history, according to the Bank of England’s estimates.
Threadneedle Street’s latest report estimates the UK’s gross domestic product will shrink 14pc this year, with a 25pc hit in the second quarter of the year.
The predictions show the devastating impact of Covid-19, which has led to a virtual shutdown of vast swathes of Britain’s economy.
Here’s how those estimates measure up to centuries of British economic history.
The Bank of England’s best estimates for historic GDP growth show such a drop would leave 2020 among the worst years in English or British economic history – with the 14th biggest drop in GDP since 1270 (the earliest year for which there is an estimate).
Still, it’s somewhat short of the plunge in 1629, the first year of King Charles I’s period of “Personal Rule” following the dissolution of Parliament.
The academics who compiled the data acknowledged it may be hazy in some ways – but said comparisons should still be valid.
“Whatever shortcomings these estimates undoubtedly have, they have one redeeming merit: they are internally consistent, insofar as the component estimates of population, sectoral output and total output really fit together,” they wrote.
By these figures, we are beyond the territory of years or decades – this could be the biggest plunge in centuries, and the worst since the UK was formed.
If the Bank of England is correct, the fall will be the biggest since 1706, a year before the Acts of Union that created the United Kingdom.
On a quarterly basis, the readings are even worse: the Bank predicts the economy is currently about 30pc smaller than a year ago, and will shrink 25pc across the current quarter (from April until the end of June).
Quarterly records don’t go back as far, and there is a sizable hole between the Bank of England’s early-20th century estimates, and the more clear record from after the Second World War. Still, the Bank’s prediction looks to be a clear blowout.
Looking at the worst quarterly falls, even the Bank’s estimates for a 3pc contraction in the first quarter would be the worst drop this side of the Second World War.
But the second quarter of 2020 is in a league of its own: dwarfing even the years of economic depression after the First World War.
Of course, the numbers are only an estimate, and today’s report acknowledged external forecasters had hugely variant predictions – with the Bank’s own forecast near the higher end.
The Monetary Policy Report notes: “The range of projections was wide, reflecting uncertainty in particular about the likely scale and duration of measures to contain Covid-19.”
The average prediction, as measured by the Bank, is for a drop of around 13pc during the second quarter.