UK finance minister Rishi Sunak hopes for quick recovery amid record economy shrinkage

UK Chancellor Rishi Sunak on Friday (June 12) said Britain’s economy was well-placed to make a quick recovery as new statistics revealed a shrinkage of a record 20.4 per cent as a result of the coronavirus lockdown.

The Indian-origin finance minister said the “lifeline” measures he had put in place, such as a scheme to help companies pay the wages of some of its staff as well as loan schemes, will help the economy bounce back to normal.

Sunak was reacting to the latest Office for National Statistics (ONS) figures which revealed the “historic” fall in the country’s gross domestic product (GDP), which has left no sector of the UK economy untouched. “In line with many other economies around the world, coronavirus is having a severe impact on our economy,” he said.

“The lifelines we’ve provided with our furlough scheme, grants, loans and tax cuts have protected thousands of businesses and millions of jobs giving us the best chance of recovering quickly as the economy reopens,” Sunak said. “We’ve set out our plan to gradually and safely reopen the economy. Next week, more shops on the High Street will be able to open again as we start to get our lives a little bit more back to normal,” the minister added.

The ONS also published figures for the three months from February to April, which showed a decline of 10.4 per cent, with carmakers and housebuilders particularly badly hit.
“Aprils fall in GDP is the biggest the UK has ever seen, more than three times larger than last month and almost 10 times larger than the steepest pre-COVID-19 fall,” said Jonathan Athow, deputy national statistician for economic statistics at the ONS. “Virtually all areas of the economy were hit, with pubs, education, health and car sales all giving the biggest contributions to this historic fall,” he said.

Meanwhile, latest figures released by the UKs Treasury department this week revealed that Sunak’s schemes, such as the Coronavirus Jobs Retention (CJRS) and the Self-Employment Income Support Schemes (SEISS), had a major uptake across all regions of the UK. Under the CJRS, up until May 31 more than 6.4 million jobs were effectively saved by the furlough or forced leave scheme in England, with more than 628,000 jobs furloughed in Scotland, 316,500 in Wales and nearly 212,000 in Northern Ireland.

“Our unprecedented coronavirus support schemes are protecting millions of vital jobs and businesses across the whole of the United Kingdom and will help ensure we recover from this outbreak as swiftly as possible,” Sunak said. “We have extended both schemes so they will continue to provide measured support across the UK as we start to reopen the economy,” he said.

The CJRS scheme will continue to support jobs until the end of October, with flexible part-time furloughing beginning in July to support businesses as the economy is carefully reopened. The SEISS scheme has also been extended with those eligible able to claim a second and final grant in August.

However, some economists fear that the worst is yet to come and expect an even bigger economic slump in the April-June quarter, possibly plunging the UK into a deep recession. Tej Parikh, chief economist at the Institute of Directors (IoD), said coronavirus had caused “unparalleled” economic turmoil which was “likely to scar the UK economy for some time yet”. “Having provided businesses life support, the government must now figure out how to stimulate activity,” he said.