Analysis by the Office for Budget Responsibility (OBR) suggests the recession would be the deepest since the 1918 Spanish Flu that followed World War One, with unemployment rising to 10%.
The forecast is based on a three-month lockdown followed by three months of partial restrictions. The forecaster predicts a rapid bounce back as the lockdown is lifted, with unemployment falling by the end of the year.
Public sector net borrowing is forecast to reach 15% of GDP making it the largest single-year deficit since the Second World War.
“We’ve already said that coronavirus is going to have a significant impact, and that in spite of our unprecedented measures, there will be hardship for businesses and individuals,” a Treasury spokesman said.
“This report confirms that. What it also says is that without the action the government has taken, the impact on businesses, jobs and individuals would have been much worse, with more people facing job losses.”
Shadow Chancellor Anneliese Dodds said: “Behind these very concerning figures lie many businesses which have gone bust and many people who have lost their jobs.
“Labour has been working constructively with Government on its economic support package. It is clear that additional action needs to be taken to increase the take-up of the different measures. We have called for urgent action in relation to the loans scheme in particular, as take-up is worryingly low.
“It is absolutely critical that government now does all it can to minimise the depth and length of the economic impact from necessary anti-Coronavirus measures.”
The SNP’s Westminster leader Ian Blackford said the OBR’s analysis highlighted the need for the UK Government to “fix the serious gaps in financial support” for those already out of work.
"The Chancellor must ensure that businesses have access to cash to stay afloat - and that all households get the support they need. This must include a guaranteed minimum income for everyone and strengthened welfare protections - so no one is left behind.
“Too many people have been left out of the current schemes - and millions are struggling to pay their bills and support their families when their incomes have been slashed.”
Mr Blackford also warned against “any rash decision to lift the lockdown too early”.
“Protecting lives must be the priority,” he said. “The lockdown must be in place for as long as is necessary to ensure people do not lose their lives needlessly.”
Scottish Labour leader Richard Leonard said the UK was “entering uncharted economic waters” and argued that “state intervention in the economy is needed more than ever”.
“This is a time, above all, for co-operation, collectivism, and mutual support,” Mr Leonard. “The UK and Scottish Governments must explore all avenues possible to protect our economy and protect the livelihoods of the people of Britain in the coming months. This is not a time for timidity: this is a time for action.”
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