Rishi Sunak today issued a grim warning that there will be no “immediate rebound” from the economic crisis caused by the coronavirus.
The Chancellor highlighted the threat of “scarring” because he said it would “take time” for people to “return to normal” even after the lockout was over.
He underscored forecasts that unemployment will hit “double-digit” percentages by the end of the year.
The dark note, as Mr. Sunak testified before the Lords’ Economic Affairs Committee, came after the OBR watchdog and the Bank of England warned that the UK was facing the worst recession 300 years old.
GDP is expected to fall by a third this quarter, as draconian restrictions aim to stop the spread of the disease strangling activity.
More evidence of the problems, official figures showed earlier that jobless claims had increased by more than 800,000 last month.
The dire economic situation has been exposed as follows:
- Britain has announced that another 545 people have died from coronavirus, 13% fewer than last week;
- The government’s plan to make it easier for students to return to school on June 1 has been plagued by pincers from teachers and unions, who fear it will not be safe;
- One study found that coronavirus kills 1.04 percent of all cases – confirming that it is 10 times more deadly than the flu;
- The environment secretary said the government was already preparing plans to reopen pubs from July with social distancing measures in place;
- Greece has offered to waive quarantine rules for British summer vacationers if the move is reciprocal.
Rishi Sunak sounded a dark note as he testified before the Lords Economic Affairs Committee today
Both the NIESR forecast and the Bank of England scenario easily show the largest decline in quarterly GDP since the numbers began to record in their modern form
This week’s OBR scenario suggests that debt will be around 110% of GDP this year
Sunak told peers that the cost of government bailouts so far is estimated at £ 100 billion.
But he hinted that the scheme covering up to 80 percent of usual monthly income for the self-employed may not be continued after June.
He said he had “looked at it differently” to give the workers leave, which will remain in place until October, although companies will have to take some of the tab from August.
OBR and the Bank have suggested that there will be a fairly rapid recovery once the foreclosure is lifted.
But Sunak said it was not clear how long the economic effects would last.
“The longer the recession, the more likely the degree of scarring,” he said.
Sunak said the UK is facing “a severe recession we have not seen before.”
Speaking of the recovery, he said, “We all hope it will be as quick and solid as it can be. We are getting data from all over Europe and around the world as countries gradually loosen and lift restrictions.
“It is not clear that there will be an immediate rebound. It takes time to return to the habits they used to have.
OBR Watchdog and Bank of England Warn UK Facing 300-Year Worst Recession
“There are still restrictions. Even if we can reopen the retail business – which I would love to be able to do on June 1 – there will still be restrictions on how people can shop, which will likely have an impact on the amount that they spend.
“These things will take time. So I think in any case, it will take a little time for things to return to normal, even after we have reopened the areas that are currently closed.
Stores and many other businesses across the country have closed, sending eight million workers home to recover 80% of their paychecks as part of the government’s leave program.
Earlier on Tuesday, the Treasury revealed that more than £ 11.1 billion has been claimed so far under the coronavirus retention program.
Hundreds of thousands of businesses have received more than £ 22 billion in three government-backed loans from their banks to help them weather the crisis.
The plans cover 90% or more of the UK’s turnover and profits, said the Chancellor.
“We have the coverage we want for all of our loan programs, so there is no need to make any other changes,” said Sunak.
He said the best way to support some of the most affected businesses – such as restaurants – would be to help them reopen.
The Chancellor pointed out that some of the companies most affected are those that employ low-income earners and young people
“It is essential, for reasons of economic and social justice, to put these people back to work,” he said.