In an article for the Daily Express, the Chancellor admits the Government is “grappling with something never seen before” in tackling the downturn caused by the coronavirus lockdown. But he insists the “resolve and creativity of the British people” will ensure the country overcomes the crisis.
Figures released by the Office for National Statistics yesterday showed the UK’s economic output (GDP) shrank by more than a fifth in the three months to the end of last June when the lockdown took hold.
The 20.4% contraction was the biggest drop on record, with huge falls in construction, manufacturing and services. It reduced the economy to its smallest size since 2003.
Data showed the economy shrank over two successive three-month periods, officially confirming the first recession since the aftermath of the financial crisis over a decade ago.
Yet in a glimmer of more positive news, the figures also showed an 8.7% rise in GDP in June, suggesting business is surging back as the lockdown restrictions are eased.
In his article for the Daily Express, the Chancellor highlighted his Budget initiatives to encourage recovery including his Kickstart Scheme to fund work placements for people aged under 25 and his Eat Out to Help Out discount to offer cut-price meals in pubs and restaurants.
Mr Sunak wrote: “What we’re grappling with is something never seen before, which is why from the start of this crisis I’ve been prepared to put aside ideology and do what was right and fair in order to protect people’s jobs, their incomes and businesses.
“But while it’s clear there are difficult choices to be made ahead, I know that with the resolve and creativity of the British people we will get through this together.
“We have a plan to protect, support and create jobs across the United Kingdom. From our Kickstart Scheme to support young people who’ve been particularly badly affected, to new incentives for training and apprenticeships, or the Eat Out To Help Out initiative to help drive the recovery and protect two million jobs in hospitality.
“These schemes will not only drive our economic recovery from Covid, but they will also play a crucial part in our levelling up agenda which is now more important than ever.
“From Sunderland to Southampton, Taunton to Teesside we are going to put the foot on the accelerator on the agenda we set out in March and make sure everyone has the same opportunity to get on in life.
“As Chancellor I will make this a key priority and ensure that no one is left without hope or opportunity.”
Mr Sunak also yesterday acknowledged that the country had hit “hard times” and faced a massive wave of job cuts.
In a statement following the release of the economic data, the Chancellor said: “I’ve said before that hard times were ahead, and today’s figures confirm that hard times are here. Hundreds of thousands of people have already lost their jobs, and sadly in the coming months many more will.
“But while there are difficult choices to be made ahead, we will get through this, and I can assure people that nobody will be left without hope or opportunity.”
In an interview with Sky News, Mr Sunak said the UK economy was getting back to a “new normal” as lockdown restrictions ease.
“It’s not a sustainable situation to have vast swathes of our economy essentially shut down.
“And that’s why we have been able to successfully reopen bits, and do it in a safe way.
“And as people get back to going shopping, or going out for a meal, or indeed getting back to their office, they will see that it’s a new normal, it’s a safe normal,” he said.
Britain’s economic slowdown was in line with Bank of England predictions and the news left the City unrattled. The FTSE 100 share index closed in positive territory last night after traders welcomed a better-than-expected jobs report in the US.
But the figures suggested the UK’s downturn could be one of the worst of the world’s leading economies.
International data yesterday showed that only Spain, with a 22.1% fall in GDP, fared worse.
Jonathan Athow, deputy national statistician at the ONS, said: “The recession brought on by the coronavirus pandemic has led to the biggest fall in quarterly GDP on record.
“The economy began to bounce back in June with shops reopening, factories beginning to ramp up production and housebuilding continuing to recover.
“Despite this, GDP in June still remains a sixth below its level in February, before the virus struck.
“Overall, productivity saw its largest-ever fall in the second quarter. Hospitality was worst hit, with productivity in that industry falling by three-quarters in recent months.”
Suren Thiru, head of economics at the British Chambers of Commerce (BCC), said: “With restrictions steadily easing, the second quarter is likely to prove to be the low point for the UK economy.
“However, the prospect of a swift ‘V-shaped’ recovery remains remote as the recent gains in output may fade over the coming months as the economic damage caused by the pandemic increasingly weighs on activity, particularly as the Government support measures wind down.
“Against this backdrop, bold action is needed to immediately inject confidence back into the UK economy.
“This should include supporting businesses to retain staff through a cut in employer national insurance contributions and targeted support to help businesses placed under local lockdowns.”
Labour’s shadow chancellor Anneliese Dodds said: “We’ve already got the worst excess death rate in Europe – now we’re on course for the worst recession too.
“That’s a tragedy for the British people and it’s happened on Boris Johnson’s watch.
“The Prime Minister will say there’s only so much he could do during a global pandemic, but that doesn’t explain why our economy is tanking so badly compared to other countries.
“It was his government that snatched away wage support for businesses that hadn’t even reopened yet. And his government that failed to get test, trace and isolate working despite claiming it’s a ‘world-beating’ system.
“A downturn was inevitable after lockdown – but Johnson’s jobs crisis wasn’t. Now he must take responsibility, scrap the one-size-fits-all withdrawal of wage support and bring the health crisis properly under control.”
Published at Wed, 12 Aug 2020 23:00:00 +0000