Last month, Rishi Sunak announced a £330billion bailout for businesses in a move to drastic “wartime” measures to battle the coronavirus pandemic. The Chancellor scrapped business rates for a year and promised huge cash grants for shops, pubs and other high-street outlets hit by a collapse in customer footfall. Mr Sunak has also made a number of other spending pledges amounting to hundreds of billions of pounds, including protection for the self-employed and households that might be struggling to pay monthly bills.
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But companies are still collapsing under the economic strain – with millions of jobs already lost.
There are increasing fears the nation could plunge into a recession deeper than the 2009 financial crisis and one of the most severe since 1900 – with the Chancellor warning of a 35 percent collapse in GDP for the current April to June quarter.
During his Spring Budget last month, it was forecast the UK’s public debt for the coming year would be £55billion, but economic experts have warned of much worse to come.
The Centre for Policy Studies (CPS) has backed the Government in “acting swiftly and decisively to support the economy” with the huge spending pledges, but warned, “these actions come at a heavy and continuing cost”.
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UK coronavirus: Government borrowing could surge to £300bn – enough to fund the NHS twice over (Image: GETTY / FLICKR)
UK coronavirus: Rishi Sunak has warned of huge damage to the economy (Image: PA)
The centre-right think tank has estimated the ongoing cost of coronavirus to the Government’s finances, incorporating official data, as well as estimates from bodies including the Office for Budget Responsibility (OBR) and Institute for Fiscal Studies, think tank.
The CPS has forecast an estimated £127 billion in direct bailout costs and £119 billion in indirect costs such as lower tax revenue, based on the OBR scenario of a three-month lockdown followed by three months of looser restrictions.
When added to the £55billion of borrowing already forecast for this financial year, this produces a huge deficit of £301 billion, representing around 15 percent of gross domestic product (GDP).
This total figure is nearly double UK public expenditure on health, which came to £150billion in 2017/18 and £153billion 2018/19.
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The CPS has listed direct measures such as the Coronavirus Job Retention Scheme, small business grant schemes and the cost of writing off debt for the NHS at £42billion, £15billion and £13billion respectively.
Robert Colvile, Director of the CPS, said: “The Government has acted throughout this crisis to save lives and protect livelihoods.
“But while it is clear to everyone that extraordinary times require extraordinary measures, they also incur extraordinary costs.
“It is vital to get the most accurate possible picture of the burden the Government is taking on in order to assess the full scale of the rebuilding that lies ahead.”
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UK coronavirus: Households could be left struggling to pay monthly bills (Image: GETTY)
UK coronavirus: Households will likely feel a huge hit to their monthly income (Image: GETTY)
Caroline Elsom, Senior Researcher at the CPS, said: “Counting the full cost of the coronavirus outbreak is vital to managing the ongoing crisis and planning future steps.
“As the economic impact becomes clearer, we will continue to track what this means for our public finances to help steer the country through to recovery.”
Earlier this month, financial and political experts warned the UK could tumble towards its biggest recession in more than a century as the true costs of fighting the coronavirus outbreak begin to be felt.
Dr Garry Young, deputy director at the National Institute of Economic and Social Research (NIESR) think tank, warned the UK now finds itself in a “precarious state” and the Government has yet to face its biggest economic challenges.
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He told Express.co.uk: “NIESR has estimated that GDP could fall by 15-25 percent in April-June. The economy should bounce back quickly when the lockdown ends, but there is a risk it won’t if firms go out of business in the meantime.
“The measures that the Government has taken were designed to provide a lifeline that would mean that the economy would be in good shape for when it can start operating as normal again, but there is no guarantee of this and we are in a precarious state.
“If the health crisis goes for half-a-year or more there could be calls to remove the support prematurely because of genuine worries about the cost.
“In many ways, the Government has had an easy ride so far, but at some stage, it will be faced by difficult trade-offs between doing ‘whatever it takes’ and protecting the public finances.”
Julian Jessop, an economics fellow at the Institute of Economic Affairs think tank, also warned of a deeper initial slump than that experienced during the financial crisis in 2008-09.