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April 28, 2020, 7:20 a.m. EDT

U.K. economy forecast to remain below pre-COVID peak through 2021 while FTSE 100 surges again

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By Steve Goldstein, MarketWatch


Getty Images
Construction workers wearing personal protective equipment, including face masks, build new apartments and a retail complex at Nine Elms in London on April 28, 2020.

The U.K. economy won’t recapture its pre-coronavirus health until the end of next year, a leading forecaster said on Tuesday.

The National Institute for Economic and Social Research says the U.K. economy is reduced by about 30% while the lockdown is in operation. The NIESR says it will take until the end of the fourth quarter of 2021 before the British economy “almost” recovers the level of the fourth quarter of 2019.

The NIESR forecasts unemployment will peak at 8.5%, saying the U.K. government’s Coronavirus Job Retention Scheme is limiting joblessness.

“So far the signs are promising, but the most significant challenges are likely to come as we approach end or winding down of the lockdown and the supportive schemes are withdrawn. In those circumstances, the government schemes will need to be adapted to help businesses survive in a partially recovered economy,” said Garry Young, deputy director of the NIESR.

The FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX -0.71% , meanwhile, continued to rally in the face of bleak economic news, with the U.K. benchmark rising 1.5%, with 88 components advancing. The index is up nearly 8% over the last month.

Barclays /zigman2/quotes/208409333/delayed UK:BARC -3.10%  was one of the strongest gainers, with the U.K. bank rising nearly 7% ahead of its results due on Wednesday.

HSBC Holdings /zigman2/quotes/203901799/delayed UK:HSBA -2.19%  slipped 0.7%. The banking giant reported a 48% drop in first-quarter pretax profit to $3.2 billion after taking $3 billion in expected credit losses and other credit impairment charges, as revenue fell 5%.

/zigman2/quotes/210598409/delayed
UK : FTSE UK
6,007.05
-42.87 -0.71%
Volume: 1.54M
Sept. 18, 2020 4:56p
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/zigman2/quotes/208409333/delayed
UK : U.K.: London
97.42 p
-3.12 -3.10%
Volume: 72.68M
Sept. 18, 2020 4:35p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
£16.89 billion
Rev. per Employee
N/A
loading...
/zigman2/quotes/203901799/delayed
UK : U.K.: London
304.00 p
-6.80 -2.19%
Volume: 59.97M
Sept. 18, 2020 4:35p
P/E Ratio
N/A
Dividend Yield
0.00%
Market Cap
£61.92 billion
Rev. per Employee
N/A
loading...

Steve Goldstein is MarketWatch markets editor for Europe. Follow him on Twitter: @MKTWgoldstein.

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