UK economy receives fresh warnings before Rishi Sunak addresses MPs
Chancellor Rishi Sunak is preparing to address MPs today following new dire predictions of the impact of coronavirus on the UK economy.
Sunak is set to face questions over how the UK will pay for huge public borrowing currently propping up the economy.
The Treasury boss extended his job retention scheme to October last week, in a move expected to cost the government around £84bn. And total public borrowing could end up well above £300bn, according to official estimates.
First quarter data showed GDP sank a record 5.8 per cent in March, prompting Sunak to warn the UK faces a “significant” recession.
But the weekend provided more alarming predictions for the hit facing the UK economy,.
Unemployment ‘could hit worst level since 1980s’
Bank of England deputy governor Andy Haldane told the Telegraph the UK faces an unemployment crisis not seen since the 1980s.
And Robert Chote, chairman of the Office for Budget Responsibility, told the BBC an expected April contraction would likely be the worst point of the recession.
However, the bigger issue was how long the UK economy takes to recovery.
“The key worry is if you have not just a very sharp downturn in the economy but one that scars its future potential,” Chote said. “It’s a matter of psychology as much as the concrete restrictions as well.”
And a period of austerity to pay for the government’s coronavirus stimulus is not “a done deal”, Chote added.
Prime Minister Boris Johnson has eased the UK lockdown, urging Brits to “stay alert” rather than “stay home”.
But while construction and manufacturing workers have gone back to work, other sectors such as hospitality face a tougher reopening. Restaurants and pubs will not reopen until at least July, and then with severe social distancing restrictions likely to remain in place.
Questions over how quickly UK economy will recover
Johnson wrote an opinion piece in the Mail on Sunday yesterday where he acknowledged people’s frustration with the “complex” relaxation of the lockdown.
He wrote the UK may battle with coronavirus “for some time to come” and said the only way to stem the spread was using “testing and tracing”. A contact-tracing app is due to go live in the UK by the end of May and the government is recruiting 18,000 people to help.
Meanwhile, fresh data will show the scale of the blow to the UK economy this week. Unemployment, inflation and retail sales data are all due to come out.
Data from the British Retail Consortium out today showed footfall to shopping centres crashed 87.8 per cent in April, and high street footfall collapsed by 81.8 per cent.
But Shore Capital analysts said they were looking ahead to May’s data for signs of recovery.
“In truth, this dataset really confirms what we already knew about the impact of lockdown upon the retail,” they wrote.
“More interesting to us will be at what pace the UK can emerge from lockdown as government advice evolves from ‘stay at home’ to ‘stay alert’. Garden centres have already re-opened and elements of the food & beverage economy are re-started trading with take-away services.”