Bank of England Governor Andrew Bailey told MPs on Wednesday that the UK economy is facing a permanent $ 33 billion impact as the corona virus outbreak emerges.
Mr Bailey warned that structural changes in the economy could have a long-term “scar” on growth and employment as people change their behavior in response to the epidemic.
Behavioral changes, such as overwork at home and greater caution in moving people out, are expected to reduce gross domestic product (GDP) by 1.5 percent each year.
Based on the 2019 release, this is equivalent to 200 1,200 per household per year than previously predicted by the Covid 19 strike.
Much of the lost output is expected to come from incompatibility in capabilities. In the post-epidemic world, some sectors such as retail and hospitality are likely to see much larger job losses than others, while others face a shortage of qualified applicants, leading to a mismatch that raises unemployment and drags economic growth.
“This is important as far as structural change is concerned, because it will cause scarring – a long-term displacement of the economy,” Mr Bailey told the Treasury Select Committee.
“This will lead to long-term unemployment and increase the natural unemployment rate over a period of time.”
Mr Bailey stressed that the economic outlook was very precarious for at least a quarter of a century.
Dave Ramston, deputy governor of the Bank of England, said he hoped things would turn out worse than forecast.
“We think the volume of GDP will be permanently lower at 1.5 per cent. For me, all risks will be higher than 1.5 per cent,” he said.
One reason for this, he warned, is that there will be a mismatch between people’s skills and available jobs as some sectors are being hit harder than others.
“As the next phase of the recovery unfolds, we can see the extent of the impact on the labor market, but we can also see the extent to which the UK economy is recycling in response to this shock.”
A semi-permanent effect may be a fall in the value of office and shop space as people work remotely.
“That business will see less investment in real estate in the future,” he said.
“It is an open question whether this will result in a less productive or more productive economy.”
Mr Ramston said as shoppers make more purchases online, companies may choose to invest their money in capital rather than labor.
For example, it means removing store-site employees to spend money on distribution centers, websites, technology and vehicles.
Over time, this will lead to higher productivity, the bank’s deputy governor said.
According to Mr Bailey, economic forecasts have become more difficult because people continue to show varying degrees of warning about the corona virus, and can make some definite assumptions about vaccines, treatments and the course of the infection.
He noted the fact that the central bank’s central environment for the economy carries more “negative risks” than any forecast. This means that the bank’s analysts believe that the UK economy is at significant risk of performing worse than this situation.