UK economy losing £2bn every day in deepest slump since Great Depression
The coronavirus lockdown has already wiped £50 billion off the economy as the UK plunges into the deepest slump since the Great Depression.
The Office for Budget Responsibility this week estimated that the closure of schools, shops, offices and factories was costing Britain £2 billion a day.
That means it has already knocked £50 billion – or 2.5 per cent – off gross domestic product in the 25 days since Boris Johnson announced the restrictions on March 23.
Empty streets: The Office for Budget Responsibility estimates that the closure of schools, shops, offices and factories was costing Britain £2 billion a day
In the US, the world’s biggest economy, another 5.2m people in the past week filed for unemployment benefits, bringing the total in just four weeks to 22m, wiping out the previous jobs boom enjoyed in that country.
A $350 billion (£280 billion) rescue programme in the US for small firms has run out of cash after being set up last month as the Treasury and congressional leaders failed to reach a deal to give it more funds.
President Trump has made clear his desire to lift the lockdown as soon as possible and get his country back to work ahead of the elections later in the year. In the UK, ministers yesterday extended the lockdown for at least another three weeks but there is growing unease in Tory circles about the economic damage.
Former Chancellor Sajid Javid said it was vital to ‘phase out this lockdown as soon as we possibly can based on scientific advice’.
The OBR warned that a three month lockdown would cause a 35 per cent slump in economic output in the second quarter of this year and drive unemployment up to 10 per cent or 3.4m from its current level of 1.3m.
Think-tank the Resolution Foundation said the economy could then return to near-normal levels relatively quickly if the lockdown ends after three months, with GDP perhaps just 3 per cent lower in the medium-term. But it warned a six-month lockdown could result in unemployment hitting 5m and the
economy taking far longer to recover. And it would send the national debt ballooning with every day of the lockdown forcing the Government to borrow an extra £1.5 billion.
The Economist Intelligence Unit (EIU) is the latest respected body to add its voice to the chorus of grim forecasts for the world economy. The International Monetary Fund and others have already forecast a downturn worse than anything since the Great Depression.
But the EIU says there is a risk of a second ‘possibly much worse’ depression as governments are falling deep into debt in order to support their health services along with struggling firms and families.
Countries that were already heavily indebted such as Italy and Spain are among those most at risk.