Forecaster predicts Britain's recovery will take four years

Pessimistic prediction suggests as many as 3 million people could be out of work

The United Kingdom economy will require four years to return to its 2019 size as consumer restraint and high levels of unemployment impact on growth, economic forecaster EY Item Club has predicted.

Analysts have pushed back the expected recovery from early 2023 to late 2024, after data showed British consumers spent less than expected in shops and restaurants after the lockdown was lifted.

"Even though lockdown restrictions are easing, consumer caution has been much more pronounced than expected," said Howard Archer, chief economic adviser to the forecaster.

The forecaster, which uses a similar economic model to the Treasury, suggests the UK economy will shrink by 11.5 percent this year and then grow by just 6.5 percent next year. It said hopes of a "V-shaped "recovery were fading.

The new figures mark a severe downgrade, as just a month ago the club forecast a contraction of only 8 percent this year.

"The UK economy may be past its low point but it is looking increasingly likely that the climb back is going to be a lot longer than expected," said Archer.

Archer pointed to worse-than-expected growth in May, when the economy expanded just 1.8 percent after crashing 20.3 percent in April. Economists had expected 5.5 percent growth.

Unemployment will also hold back the economy, the forecaster said. It expects unemployment to jump to 9 percent by late 2020 or early 2021, up from 3.9 percent in February. This would mean more than 3 million people would be out of work.

Earlier this month, the Office for Budget Responsibility, or OBR, laid out a less pessimistic forecast. Although the OBR said the UK economy is likely to shrink 12.4 percent this year, it said growth could be 8.7 percent in 2021. Under its main scenario, the economy would recover to its pre-novel coronavirus size by the end of 2022.

Mark Gregory, UK chief economist at the forecaster, said: "Government measures have provided significant short-term support, but many businesses are waiting for more certainty over the economic outlook before making longer term investment decisions."

The bleak outlook comes ahead of April-June GDP figures for the United States and the eurozone, which will show a second successive quarterly contraction.

Economists at Royal Bank of Canada have forecast the eurozone's largest-ever contraction, of perhaps 11 percent or more. The US is forecast to contract by about 8 percent.

The latest forecasts come as research indicates that the school time lost because of the pandemic could harm the UK economy for the next 65 years.

A study published by the Royal Society says there is a "huge base of evidence" showing that earnings are linked to education and skills, and that losing so much time in school will have negative economic consequences.

The research group, including academics from Cambridge and Bristol universities, said the disruption to lessons will have a deep impact on future economic growth. Getting pupils back to school must be a priority, said the study.