Million jobs could go within months
Sunak’s safety package may not be enough to stop unemployment rate hitting 7pc, experts warn
MORE than a million jobs could be lost within months despite a raft of emergency measures to protect the economy from the ravages of the coronavirus, experts have warned.
It came as Fitch, the credit ratings agency, downgraded the UK’S public debt to AA- last night, saying the pandemic would lead to a “significant weakening” in its public finances and cause economic output to fall 4pc this year. The agency also put the UK on negative watch, raising the prospect of it losing its double A rating for the first time in recent history.
Rishi Sunak, the Chancellor, has put in place unprecedented guarantee schemes to safeguard the salaries of UK employees as well as the vast majority of the nation’s five million selfemployed workers, with the state effectively paying up to £2,500 a month to any worker temporarily laid off.
Mr Sunak gave more help to companies by agreeing to cover employers’ national insurance and auto-enrolment pension contributions yesterday – but the jobs market’s scars are still likely to be deep, according to the Centre for
Economics and Business Research (CEBR). The consultancy forecasts a rise in the unemployment rate from the current 3.9pc to 7pc in the third quarter, sending the current jobless total of 1.34 million soaring to about 2.4 million.
Doug Mcwilliams, CEBR chief executive, praised the Government’s efforts and said they were likely to have prevented millions more jobs being lost. But he added: “There are quite a few people that fall between the cracks, including people who were moving between jobs just at the time when the coronavirus picked up.”
Fears for the UK jobs market have grown in the wake of a record 3.3million claims for US unemployment benefits in the past week, by far the highest total since records began. In Britain, the number of people claiming universal credit surged to 477,000 last week as the country entered lockdown and thousands of firms shut up, according to the Department for Work and Pensions. There has also been a major spike in Google searches for “unemployment benefits”. Allan Monks, UK economist at JP Morgan, said the figures suggested a 500,000 rise in joblessness in little more than seven days, adding: “And we’re not even in April yet.” Mr Monks said that if the rise in benefit claims continued, unemployment would hit 8pc next month.
A Policy Exchange report, co-authored by Gerard Lyons, Boris Johnson’s former economics adviser, said 5.3m people – or one in six of the working population – were in jobs directly threatened by the outbreak.
Meanwhile, pressure on firms’ cash flow is set to increase as the Treasury insists the National Living Wage will be hiked next week, in line with a Conservative election pledge to raise it to £10.50 over five years. The legal minimum for over-25s is due to rise from £8.21 per hour to £8.72 at the start of April, the biggest cash increase ever. Some economists had argued the rise should be delayed.
The Organisation for Economic Cooperation and Development has predicted that the impact of business closures could send output crashing by 15pc or more.
Angel Gurria, the OECD secretarygeneral, warned the G20 ministers that each month of containment would cost two percentage points in annual growth. London-based consultancy Capital Economics said up to 40pc could be wiped off global GDP.
More than 4,000 jobs have been lost from the UK’S North Sea oil and gas industry, figures revealed yesterday.