The Chancellor predicted the UK will be clobbered by a severe recession “the likes of which the nation has never seen before”. His bleak assessment came as the number of people claiming unemployment benefits hit record levels yesterday. Claims soared by a record 846,500 to 2.1 million in April – the UK’s first full month in lockdown – according to the Office for National Statistics.
Mr Sunak indicated that unemployment will surge further despite a massive state job retention scheme that currently has 7.5 million people on furlough in efforts to prop up the country’s workforce during the pandemic.
He pointed to estimates that suggest joblessness could surge to at least 10 percent, a level not seen since the 1990s.
It was 3.9 percent in March, shortly before the country was placed into lockdown.
“The Bank of England and the OBR both point to around a double digit percentage unemployment rate,” he said.
“I think the OBR estimate had that topping out at about three million. Obviously the impact will be severe.”
He added: “I won’t be able to protect every job and every business.”
The Chancellor also warned there will be no immediate economic bounce-back when the nationwide shutdown ends.
Chancellor Rishi Sunak
“No doubt there will be more hardship to come,” he said. “This lockdown is having a very significant impact on our economy.
“We are likely to face a severe recession, the likes of which we haven’t seen, and of course that will have an impact on employment.”
Mr Sunak said the length and depth of that recession depends on how much longer the UK is in lockdown for.
“Even if we can re-open retail, which I would very much like to be able to do on June 1, there will still be restrictions on how people can shop, which will have an impact likely on how much they spend,” he said.
“And those things will all take time. So I think, in all cases, it will take a little bit of time for things to get back to normal, even once we’ve re-opened currently closed sectors.”
Early ONS estimates for last month indicate that the number of paid employees fell by 1.6 percent compared with March, as firms began to feel a greater impact from the nationwide shutdown.
Job vacancies have plunged, with the number of empty posts in the three months to April diving by 170,000 to 637,000, compared with the previous quarter.
The gloomy data comes after the Office for Budget Responsibility and Bank of England warned last month that the UK faces the worst recession in 300 years with GDP expected to tumble by a third between April and June.
Jonathan Athow, deputy national statistician for economic statistics at the ONS, said: “While only covering the first weeks of restrictions, our figures show Covid-19 is having a major impact on the labour market.
“In March employment held up well, as furloughed workers still count as employed, but hours worked fell sharply in late March, especially in sectors such as hospitality and construction.
“Through April, though, there were signs of falling employment as real-time tax data show the number of employees on companies’ payrolls fell noticeably, and vacancies were sharply down too, with hospitality again falling steepest.”
Employment Minister Mims Davies said: “Clearly these figures are behind on our current struggle but the impact of this global health emergency is now starting to show – and we’re doing everything we can to protect jobs and livelihoods.
“What these statistics do highlight is that, heading into the pandemic, we had built strong foundations in our economy, which will be crucial as we gradually move forward as the lockdown eases and look to bounce back.”
Former Conservative Party leader Sir Iain Duncan Smith
Former Conservative Party leader Sir Iain Duncan Smith yesterday called on Boris Johnson to start getting the economy working again and to reconsider the two-metre social distancing rule.
The Tory MP told BBC Radio 4’s Today programme that unemployment depends “first and foremost on how quickly are we able to get the economy moving”.
“We need to get that moving as quick as possible and I’ve certainly been arguing that for some weeks now,” he said.
On social distancing, Sir Iain said “we’re the only country certainly in Europe that I know of” that uses the two-metre rule.
“I think when it comes to the hospitality sector, I think we do need to look at it very carefully,” he said.
“So we do need to look at how they manage that process and give them some flexibility.”
Tej Parikh, chief economist at the Institute of Directors, said: “Even before lockdown, coronavirus was threatening to take the shine off the UK’s sterling jobs record, and initial estimates for April don’t make for easy reading.
“It’s clear that, without the Government’s furlough scheme, the picture would have rapidly deteriorated even further.”
Fiona Cincotta, financial market analyst at Gain Capital, said: “To put this into context, at the peak of the financial crisis jobless claims hit a high of 136,000.
“The surge in people submitting benefit claims last month come as the virus took its toll on jobs and despite the Government’s job retention scheme.
“This figure is going to get worse before it gets better.”
Published at Wed, 20 May 2020 05:13:00 +0000