BRITAIN was warned today of pay cuts and up to two million job losses caused by the coronavirus lockdown.
Treasury forecasters fear the economy faces its worst slump on record.
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Chancellor Rishi Sunak has said it is “not surprising” that the UK is facing it’s biggest economic slump in 300 years – as this has never been seen before.
As the UK death toll hit 12,107, the full scale of the Covid-19 meltdown emerged in government figures which predicted the country’s economy may be slashed by a record 35 per cent by June.
Unemployment could rocket to 3.4 million and the deficit may spiral to £218billion this year.
The figures, produced by the Office for Budget Responsibility, predict the worst GDP slump in a single quarter since records began in 1908.
Separately, The International Monetary Fund warned the global economy will suffer its deepest plunge since the Great Depression of the 1930s.
One in ten small firms plans to close or sell up, the Federation of Small Businesses warned, while one in five aims to downsize.
The Chancellor said this afternoon: “This is an unprecedented times and unprecedented crisis and that called for an unprecedented economic response.
“So in that sense, its not surprising to see some of these figures, as it’s unlike anything we’ve dealt with before.”
It came as desperate small firms begged the Chancellor to speed up his bailouts.
Many firms face going to the wall in ten days’ time if they cannot pay staff wages.
Senior Tories joined Labour to call on Mr Sunak to turbocharge the sluggish delivery of loans, wage support and grants.
Westminster was stunned yesterday by the independent Office for Budget Responsibility’s projection that the economy could shrink by 35 per cent if the Covid-19 lockdown continues for three months.
The retraction would be the biggest slump in a single quarter since 1720, when the catastrophic shares crash known as the South Sea Bubble rocked the nation.
It would dwarf anything seen in either world war, or the Wall Street Crash of 1929 which led to the Great Depression.
The coronavirus aftershock could also eclipse the Spanish Flu pandemic in 1918, the energy crisis in the early 1970s and the financial crash of 2008.
Mr Sunak insisted Britain could bounce bank quickly once the lockdown was lifted. But he conceded: “This is going to be hard.
“Our economy’s going to take a significant hit and people are going to feel that in their jobs and in their household incomes.
“As I have said before, we cannot protect every business and every household. But the report makes clear that the unprecedented actions we’ve taken will help to mitigate the impact of the virus on our economy.
“If we hadn’t done these things, it would mean that things were a lot worse.”
But he stressed that the economy would “bounce back quickly” from the shock of the virus.
And he promised that young people today would still have “hope and opportunity” in their futures – even if they looked uncertain right now.
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The OBR warned of an unemployment peak of 3.4million in the summer, and said the jobless total will still remain above two million throughout this year and 2021.
Average wages will plummet by 10.6 per cent this year, it said.
The hit on public finances from lost growth will also be huge, the forecasters warned.
Government borrowing to keep the economy afloat will rise by an extraordinary £218billion this year to £273billion — the largest annual deficit since World War Two.
The UK’s total national debt will rise above 100 per cent of GDP, a traditional red-warning light.
The OBR’s prediction of a quick recovery by year end were blasted by some analysts as too positive — and warned instead of an “L shaped” recession where the economy takes several years to recover.
Mr Sunak signalled key policies such as the pensions Triple Lock faced being ripped up to pay for the immense damage.
He refused to stand by the Tory election offer to pensioners when quizzed on it yesterday.
Heralding the start of a new era of austerity, the Chancellor warned the time will come when he would have to “right the ship”.
Mr Sunak also faces spiralling pressure to speed up Treasury help before businesses go bust.
The British Chamber of Commerce reveals today that 66 per cent of businesses surveyed have furloughed staff to get 80 per cent of wages paid by the Government.
Director General Dr Adam Marshall said: “Businesses on the front line need cash to start flowing from support schemes fast.
“With April’s payday coming up, we are fast approaching a crunch point, and both the furlough scheme and loans need to be accelerated. It is essential that the Job Retention Scheme makes payments to businesses as soon as possible. Any delay could mean more livelihoods under threat.”
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But quizzed by The Sun during the No 10 coronavirus press conference, the Chancellor refused to give a cast-iron promise that he would start funding wages by April 25, payday for many.
Insisting “we have had to build a brand-new system from scratch”, Mr Sunak said: “You’re right to keep pushing. You should be able to get the cash before the end of the month.” The International Monetary Fund also warned Covid-19 is a “crisis like no other” and will trigger the steepest recession globally in almost a century. While it sees a potential recovery next year, it warned the crisis would be worse if the coronavirus lingers or returns.
It predicted the global economy would shrink by three per cent this year — dwarfing the 0.1 per cent contraction seen at the height of the financial crisis in 2009.
In January, it had forecast a 3.3 per cent growth for the global economy this year. It now expects the UK economy alone to contract by 6.5 per cent in 2020.
Its chief economis Gita Gopinath warned: “This crisis is like no other.” She added: “This is a deep recession. It is a recession that involves solvency issues and unemployment going up substantially and these leave scars.”
She added: “Like in a war or a political crisis, there is continued severe uncertainty about the duration and intensity of the shock.”
While it anticipates strong global growth of 5.8 per cent next year, much depends on the longevity of the pandemic, its effect on activity and related stresses in financial and other markets.
A lengthier pandemic could knock another three per cent off output (as measured by GDP) this year, while a return of the virus next year would wipe eight per cent from 2021’s economy.
The IMF said: “Many countries face a multi-layered crisis comprising a health shock, domestic economic disruptions, plummeting external demand, capital-flow reversals and a collapse in commodity prices. Risks of a worse outcome predominate.”
In the US, GDP will contract 5.9 per cent, the fund predicts, but may grow 4.7 per cent next year.
The eurozone will probably shrink by 7.5 per cent in 2020 and expand 4.7 per cent in 2021, it said.
Britain’s coronavirus death toll rose by 778 today.
And as the bug sweeps through care homes it emerged the nation has had its worst weekly death toll on record.
One in five of all 16,387 deaths in England and Wales in the week ending April 3 was linked to the virus.
WHEN THE BUBBLE BURST: South Sea Bubble financial crash
THE South Sea Bubble is the name given to a major financial crash in London in 1720 which had devastating consequences.
It came after the South Sea Company – founded in 1711 to reduce national debt – saw stocks dramatically rise and collapse.
The crash, just nine years after the company was set up as a public-private partnership which dealt in government debt, left thousands of investors ruined.
People who had made a huge amount of money from buying shares in the company lost everything. There were mass suicides and people driven to poverty as lives were ruined as a result.
The entire UK suffered greatly and property and investments were lost, with the national economy reduced.
It also had a knock on effect for European markets, interlinked as they were with the London market.
The South Sea Company Directors were arrested and their estates forfeited, with 462 members of the House of Commons and 112 Peers in the South Sea Company involved in the crash.
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