• Military
• WMD
• Intelligence

• Security Menu                     

• Systems
• Industry
• Operations
• Hot Documents
• News
• Reports
• Policy
• Budget
• Congress
• Links

• Space

Coronavirus Could Shrink UK GDP 35 Percent, Raise Unemployment Million

Sputnik News

13:57 GMT 14.04.2020(updated 14:24 GMT 14.04.2020)

The OBR forecast was based on the assumption restrictions on economic activity of some kind would be maintained for six months, to ever-decreasing levels, although the organisation made clear it wasn't predicting what the government would actually do.

The UK economy could shrink by 35 percent and unemployment rise by over two million due to coronavirus, the government's independent economics forecaster the Office for Budget Responsibility has warned.

In a striking assessment of potential economic fallout from Covid-19, the OBR said the country's gross domestic product could plunge by over a third in the second quarter of 2020, and 13 percent for 2020 as a whole, producing a hit to living standards worse than the initial shock of the 2008 financial crisis, with unemployment hitting 10 percent by July, and government borrowing increasing at the fastest pace since World War II, quintupling to £273 billion, or around 14 percent of GDP. The disconsolate outlook follows Foreign Secretary and acting Prime Minister Dominic Raab warning the UK is likely to remain in lockdown for at least another month.

"The longer the period of economic disruption lasts, the more likely it is that the economy's future potential output will be scarred. The immediate cost of the government's actions may be high, but we can be confident that the cost of inaction would ultimately have been much higher," the OBR said.

Responding to the forecast, Chancellor Rishi Sunak said it was important "to be honest about the hardship ahead" and it was clear the lockdown would have a highly deleterious economic impact, with the government unable to protect every job and business. Nonetheless, he said the number of companies able to access government loads should "tick up considerably into the thousands this week".

"The report makes clear the actions we've taken will help to mitigate the impact of the virus on our economy and that if we hadn't done these things it would mean that things were a lot worse, for example with unemployment. [This isn't] a choice between health and economics – that defies common sense. I'm speaking to the banks every single day. There was an overwhelming demand early on, that backlog is being worked though, which will be comforting. It's something that we're looking at very closely. Acceptance rates on applications, the data we're getting through, are reasonably high and banks are extending overdrafts," he explained.

Commenting, Labour shadow Chancellor Anneliese Dodds said additional action was necessary to ensure take-up of the economic measures introduced by the government was increased.

"Behind these very concerning figures lie many businesses which have gone bust and many people who have lost their jobs. Labour has been working constructively with government on its economic support package. It is clear that additional action needs to be taken to increase the take-up of the different measures. We have called for urgent action in relation to the loans scheme in particular, as take-up is worryingly low. It is absolutely critical government now does all it can to minimise the depth and length of the economic impact from necessary anti-coronavirus measures," she added.

The Scottish National Party's leader in Westminster, Ian Blackford, called on the UK government to fix shortfalls in support being offered to those who've lost their jobs or seen their incomes reduced, renewing calls for a guaranteed minimum income and warning the UK government against lifting lockdown too early, as "protecting lives must be the priority".

"The Chancellor must ensure that businesses have access to cash to stay afloat - and that all households get the support they need. This must include a guaranteed minimum income for everyone and strengthened welfare protections - so no one is left behind. Too many people have been left out of the current schemes - and millions are struggling to pay their bills and support their families when their incomes have been slashed. Ensuring the right support is crucial but I would also warn the UK government against any rash decision to lift the lockdown too early. Protecting lives must be the priority. The lockdown must be in place for as long as is necessary to ensure people do not lose their lives needlessly," Blackford said.

© Sputnik