UK facing ‘significant recession’ this year due to coronavirus pandemic, Chancellor warns
Rishi Sunak said the UK is likely to face a 'significant recession' this year (Sky News)
3 min read
Rishi Sunak has warned the UK is facing a "significant recession" this year as a result of the damage caused by the coronavirus pandemic.
The Chancellor made the comments after new figures revealed the economy shrank at the fastest pace since the 2008 financial crisis in the first three months of this year.
In the first official estimates which take account of the impact of the Covid-19 crisis, the Official for National Statistics found the UK economy contracted by 2% in the first quarter of the year.
And there was a sharp 5.8% downturn logged in March - the biggest monthly fall since records began in 1997 - when the lockdown to prevent the spread of the disease came into force.
Mr Sunak said: "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."
He added: “We’re seeing the impact of Coronavirus on our economy. And that's why we've taken the unprecedented actions we have to support businesses, and indeed people and their jobs and incomes through what is a very difficult time.
“That's why we extended the furlough scheme yesterday to the end of October. And indeed, the self employment scheme opens today ahead of schedule.”
Asked if for the economy to recover there would need to be tax rises, the Chancellor said: “I think it's far too early to speculate about the future.
“But given... the unprecedented economic uncertainty that we are now facing, the priority has got to be right now protecting people's jobs and incomes and supporting business through this time. That is the best way.”
Pressed on the issue, after a leaked Treasury report estimated this year’s budget deficit could rise as high as £516billion, Mr Sunak replied: “It's completely premature to speculate about future public finances, budgets and the economy.
“What we do know is the best way to have strong public finances in a strong economy in the future, is to protect as many businesses and jobs today and that's exactly what we're doing.
“And we know because people like the Office for Budget Responsibility and the Bank of England have said, if we didn't do what we're doing today, the cost in the future would be far higher.”
The comments came as Professor Ian Diamond, the UK National Statistician, warned a long recession could lead to a “significant number of deaths”.
He told MPs on the Public Administration and Constitutional Affairs select committee: “If, and I stress if, we end up with to an L-shaped recession, as opposed to a V-shaped where we come out quite quickly - an L-shape over a long period of time could lead to a significant number of deaths as a result of people being pushed into poverty or into long-term unemployment.
“And we know that people in the lowest deciles of income have higher mortality rates, sadly, in our country. And if you increase that, you’re likely to see an increase in deaths.”
PoliticsHome provides the most comprehensive coverage of UK politics anywhere on the web, offering high quality original reporting and analysis: Subscribe