Rishi Sunak warns ‘economic emergency has only just begun’

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By Szu Ping ChanBusiness reporter, BBC News

]]> ]]> *:not([hidden]):not(style) ~ *:not([hidden]):not(style){margin-left:0.5rem;} ]]]]> ]]> ]]> ]]> ]]> ]]> ]]> media captionChancellor Rishi Sunak: Coronavirus to leave ‘long-term scarring’ on UK economy ]]> *:not([hidden]):not(style) ~ *:not([hidden]):not(style){margin-top:1rem;} ]]]]> ]]>

]]> The “economic emergency” caused by Covid-19 has only just begun, according to chancellor Rishi Sunak, as he warned the pandemic would deal lasting damage to growth and jobs.

Official forecasts now predict the biggest economic decline in 300 years.

The UK economy is expected to shrink by 11.3% this year and not return to its pre-crisis size until the end of 2022.

Government borrowing will rise to its highest outside of wartime to deal with the economic impact.

The government’s independent forecaster, the Office for Budget Responsibility (OBR) expects unemployment to jump to 7.5% next year, with a million more people out of work.

This is the highest jobless rate since the financial crisis in 2009.

However, fewer jobs are expected to be lost than predicted this summer.

Setting out his Spending Review detailing how much would be spent on public services, Mr Sunak said the government was dealing with an “economic emergenc”y. “That’s why we have taken, and continue to take, extraordinary measures to protect people’s jobs and incomes,” he added.

Mr Sunak confirmed that public sector workers – excluding some NHS staff and those earning less than £24,000 – will have their pay frozen next year.

The government has extended its furlough scheme to support jobs and wages until next March.

Mr Sunak said: “This is an economic emergency. That’s why we have taken, and continue to take extraordinary measures to protect people’s jobs and incomes.”

The shadow chancellor, Anneliese Dodds, criticised the pay freeze.

She said: “Earlier this year the chancellor stood on his doorstep and clapped for key workers. Today, his government institutes a pay freeze for many of them. This takes a sledgehammer to consumer confidence.”

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]]> New growth forecasts

Mr Sunak said the government had already spent £280bn to help support the economy through the coronavirus.

It will spend a further £55bn next year as part of a package of measures to support the recovery. This includes billions of pounds to help people find jobs.

However, Mr Sunak said long-term scarring meant the economy would be 3% smaller in 2025 than expected in the March budget.

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