SEVERE SLUMP ‘LIKELY’:
CHANCELLOR RISHI Sunak has admitted it is “very likely” that the UK will face one of the worst recessions in centuries as a result of the coronavirus crisis.
The UK economy contracted at the fastest pace on record in March as the coronavirus crisis puts Britain on the brink of the worst recession in 300 years.
The Office for National Statistics (ONS) revealed activity plunged 5.8 per cent in March in the biggest monthly fall since records began in 1997.
And Mr Sunak, the MP for
‘It is now very likely the UK economy will face a significant recession this year.’
Richmond in North Yorkshire, told the BBC yesterday: “A recession is defined technically as two quarters of decline in GDP.
“We’ve seen one here with only a few days of impact from the virus, so it is now very likely that the UK economy will face a significant recession this year and we are in the middle of that as we speak.”
The March tumble sent gross domestic product (GDP) down two per cent overall in the first quarter – the biggest fall since the end of 2008 when Britain was at the height of the financial crisis.
The latest figures show the first direct effect of the Covid-19 pandemic on the UK economy after the country was placed in lockdown to control the spread of the virus. But with the lockdown only coming into place on March 23, the second quarter will show the full hit on the economy after the UK ground to a standstill.
Experts said the first quarter data suggested the economy could contract by up to 20 per cent between April and June as the full effects of the lockdown are captured.
The Resolution Foundation think-tank warned that the first quarter drop was an “ominous sign of things to come”.
The Daily Telegraph reported yesterday that a Treasury document estimated the UK’s deficit could reach £337bn this year because of the pandemic, compared to the forecast £55bn in March’s Budget.
It said the assessment, drawn up for the Chancellor and dated May 5, warned that to fill such a gap in the public finances through tax revenue rises would be “very challenging breaking the tax lock”.
The paper said measures including income tax hikes, a twoyear public sector pay freeze and without the end of the triple lock on pensions may be required to fund the debt.
But Labour urged the Government to reject public sector spending cuts as a way of paying off the cost of the pandemic.
Shadow Chancellor Anneliese Dodds said: “A lack of resilience in our public services, caused by 10 years of underfunding, has made it harder to deal with the challenge of coronavirus.
“After all our public services and key workers have done to save lives during this pandemic, there must be no return to a society where we lack that resilience.”
And Shreya Nanda, an economist at the IPPR think-tank, said: “The leaked document shows the Treasury is looking primarily at measures that will put the burden onto ordinary people. We cannot let this crisis and the response turn into a giant upwards redistribution, as after 2008.”