British economy ‘to get worse’ before it recovers
London, UK - British Finance Minister Rishi Sunak said on Monday that the coronavirus-ravaged economy would get worse before it recovers amid warnings that more than 250,000 small firms could go bust this year.
“Coronavirus has already caused significant harm to our economy,” Sunak told parliament, noting that it total output was 6.1 per cent smaller than before the health crisis erupted last year and sparked a historic recession.
“Even with the significant support we have provided, over 800,000 people have lost their job since February,” he said.
“And while the new national restrictions are necessary to control the spread of the virus, they will have a further significant economic impact.
“We should expect the economy to get worse before it gets better,” he added.
Sunak pointed to the Conservative government’s stimulus measures, which so far have totalled more than £280bn.
But Britain’s main opposition Labour party lashed out at the chancellor of the exchequer for failing to deliver any new policy announcements.
“The purpose of an update is to provide us with new information not to repeat what we already know,” said Labour finance spokeswoman Anneliese Dodds.
The government last week launched an extra £4.6bn package, including grants for retail, hospitality and leisure businesses, as it put the country into a fresh national lockdown.
At the heart of UK stimulus policy is the furlough scheme, which pays the bulk of wages for around 10mn private sector workers and runs until the end of April.
Britain is facing a renewed surge of coronavirus cases that has seen more than three million people infected and more than 80,000 deaths in the last 12 months. The government is pinning its hopes on a mass vaccination programme, which has so far seen some 2.4mn people inoculated.
But amid hopes of a return to normality in the coming months through science, one study suggested more than 250,000 small British businesses face bankruptcy this year without more state help, given the problems posed by the coronavirus and the post-Brexit trade fallout.
“A record number of small business owners are planning to close their firms over the coming twelve months, putting the UK on course to lose more than a quarter of a million businesses,” the Federation of Small Businesses (FSB) estimated after quizzing some 1,400 firms.
The FSB also argued that Sunak’s virus support measures did not ‘keep pace’ with tightening lockdown restrictions.
Meanwhile, exporters were ‘feeling the strain as [the] new EU-UK trade deal beds in’ following Britain’s final exit from the EU single market and customs union on December 31.
FSB national chairman Mike Cherry called on the government to look at how emergency debt facilities could help small businesses to survive.