June 24, 2020 @ 9:29 by Richard Dawson
The coronavirus pandemic could see the North East economy contract by 6.8 per cent in 2020, with the economy unlikely to fully restart until a vaccine or effective treatments for the virus are available, according to KPMG.
In its latest quarterly economic outlook, KPMG has considered four scenarios with differing dates for the eradication of the pandemic.
This data assumes a scenario in which lockdown restrictions are lifted this summer, with a vaccine enabling all social distancing measures to be removed and pandemic-related uncertainty to dissipate from July 2021.
However, the UK could start 2021 with another negative shock to the economy, due to the end of the Brexit transition period.
National GDP, which could decline by 7.2 per cent this year, could contract further as we leave the EU and therefore KPMG’s forecast for 2021 is for only a modest recovery of 2.8 per cent.
David Elliott, KPMG’s office senior partner in Newcastle, said: “Our region’s economy will be severely hampered by the uncertainty of being without a clear end to the current crisis despite a gradual easing of restrictions.
“Our relative exporting strength – generally an advantage – puts us in a vulnerable position as we expect to leave behind the UK’s transition arrangements with the EU.
“While our forecast is based on a trade deal agreement by the year’s end, even without tariffs we anticipate some additional trade friction causing exports to fall back at the start of the year.
“On the upside, the dominance of health and public services in parts of our regional economy offers some insulation from the downturn, while we are not overly reliant on the hardest hit sectors such as travel and hospitality.”
KPMG expects that the pandemic will continue to have a severe impact on the labour market, despite support from the Coronavirus Job Retention Scheme (CJRS).
The headline unemployment rate could rise to 8.6 per cent this year and 11 per cent in 2021, the financial services conglomerate says.