Britain is at a “critical” point where decisions made by the government could make or break its economy for years to come, according to the Organisation for Economic Co-operation and Development (OECD).
“The United Kingdom is at a critical juncture,” the OECD wrote in its United Kingdom Economic Survey, published on Wednesday.
“Decisions made now about management of the COVID-19 crisis and future trade relationships will have a lasting impact on the country’s economic trajectory for the years to come.
“The outlook is exceptionally uncertain.”
The UK economy was fragile pre-crisis and now faces the twin challenges of a COVID-19 second wave and Brexit. A failure to manage the issues could “exacerbat[e] pre-existing weak productivity growth, inequalities, child poverty and regional disparities,” the OECD said.
On COVID-19, the reimposition of lockdowns could “lead to weaker growth, higher unemployment and even greater pressure on balance sheets,” the OECD said.
“On-going measures to limit a second wave of infections will need to be carefully calibrated to manage the economic impact.”
Meanwhile, a “disorderly” exit from the EU at the end of the Brexit transition period in December “would have a major negative impact on trade and jobs.” The OECD urged the UK government to strike a trade deal with the EU.
Watch: What happens if no Brexit trade deal is struck?
“Agreeing a close trade relationship with the European Union would support recovery, productivity and employment for both parties,” the organisation said.
The OECD also called for state investment in infrastructure and training to power the UK’s recovery from the COVID-19 crisis.
“Well-directed good-quality public investment and higher private investment are needed to strengthen the recovery and boost productivity,” the OECD wrote.
“Expanding efforts now to provide good-quality ICT training to low-skilled workers would help adapt to the changes in the labour market, while boosting productivity growth and reducing inequality.”
The recommendations came in a 125-page report prepared by the organisation on the medium and long-term outlook for the UK economy. The last OECD survey of its kind done on Britain was in 2017.
The OECD left its forecast for the immediate outlook for the UK economy unchanged from estimates shared in September. Britain’s GDP is expected to fall by 10.1% this year, before rebounding 7.6% next year.
Watch: What are freeports?