Rishi Sunak has already announced a £330billion emergency bailout for businesses as tens of thousands struggle to stay afloat as the enforced coronavirus lockdown measures virtually shut down the country. The Chancellor has also scrapped business rates for a year and promised cash grants for shops, pubs and other high-street outlets hit by the slump in customers. These spending pledges have so far totalled almost £1trillion so far, and Mr Sunak has pledged to spend more if absolutely necessary. Thousands of companies have already gone out of business, with many others warning of severe consequences – triggering a huge collapse in the jobs market.
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But there are increasing fears Britain is already well on the way to collapsing into a huge recession – deeper than the 2009 financial crisis and one of the most severe since 1900.
Forecasts are warning economic contraction could soar beyond six percent this year, compared to 4.2 percent during the financial crisis in 2009, and a deeper contraction than during the Great Depression more than a century ago.
However, experts have warned the huge impact on finances, businesses and consumer spending could see the UK economy shrink by as much as 25 percent over the coming weeks and months.
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 economy will be unable to recover if businesses continue to go bust.
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The coronavirus crisis is sending the UK spiraling into a huge recession (Image: GETTY)
Rishi Sunak has made a number of huge spending pledges (Image: GETTY)
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
He said: “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.
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Empty high streets means consumer spending is virtually non-existent (Image: GETTY)
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Julian Jessop, an economics fellow at the Institute of Economic Affairs think tank, warned the economy could shrink by as much as 25 percent and warned of a deeper initial slump than that of the financial crisis in 2008-09.
He said: “There is already a huge hit to economic activity, which could shrink by as much as a quarter in the coming months.
“There should then be a gradual recovery as activity returns to normal.
“Compared to the global financial crisis of 2008-09, the initial slump will be much deeper, but the recovery should be quicker, once the government takes its foot off the brakes.”
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Millions of jobs have already been lost as a result of the coronavirus lockdown (Image: GETTY)
Major high street retailers have also struggled (Image: GETTY)
But he warned: “If you don’t think the UK is already in recession, you need to rethink your definition. We’re clearly in one now.
“In the UK, a recession is more commonly defined as two successive quarters of falling GDP. That seems almost certain.”
Experts have also urged the Government to act now to protect against significant long-term damage to the UK economy, or else risk the country sinking into a disastrous situation much like the Great American Depression in the 1930s.
Ben Harris-Quinney, chairman of the Bow Group think tank warned: “The knock-on effects from the recession we find ourselves in, and our lack of progress in dealing with the national debt previously, may mean that Britain never fully recovers to the global position we enjoyed before the 2008 crisis.
Nearly 9,000 people have died from coronavirus in the UK (Image: EXPRESS)
“The general pattern we have seen over the last two decades is a pivot of power and wealth from west to east, and coronavirus will likely speed this up.”
He added: “So far the Government has been playing catch up, what they need to do is get ahead of the curve and address future issues resulting from this crisis that have not yet occurred.
“It is likely there will be issues with the supply of food and goods, there will be mass unemployment and it is unlikely a coronavirus vaccine will be soon to arrive or effective in dealing with the virus.
“We therefore have to adjust to this new normal, and put things in place now that will keep the country going for years to come.”
Dr Steve McCabe, associate professor at the Institute of Design and Economic Acceleration, and senior fellow at the Centre for Brexit Studies at Birmingham City University, warned the Government not to let what would initially be a short-term recession collapsing into something much more serious.
He said: “The challenge for the Treasury is in avoiding short-term recession become embedded into the medium and long-term which would produce a depression with all of the attendant social and economic consequences that were experienced during the Great American Depression in the 1930s.
“This led to an upheaval and a clamour for simplistic solutions that, destructively for the world, created a rise in fascism and the Nazis in Germany.”