When the pandemic subsides and ministers withdraw their multi-million pound support measures the country will be faced with a colossal debt mountain
When the pandemic subsides and ministers withdraw their multi-million pound support measures the country will be faced with a colossal debt mountain. These were the research results of a panel of economists assembled by The Mail on Sunday. They were set the task of investigating the likely long-term implications of the crisis.
Michael Gove has indicated yesterday that the borrowing to pay for the upkeep of the nation throughout the crisis will come with a bill in the future.
Professor Peter Spencer, of the University of York, said that even nationalising companies vital to the economy was being considered.
The academic said: I wouldn’t be surprised if the Government tries to separate British Airways from the rest of International Airlines Group and renationalise it.
This would see a fall in IAG share.
Carl Emmerson, deputy director of the Institute for Fiscal Studies, said the plummeting stock market had already caused a great deal of damage to pension schemes.
The economic expert sought to warn the public that share prices may not bounce back after the pandemic ends.
Another Professor, Ha-Joon Chang, told of the ultra-low return on savings because of the Bank of England base rate now at 0.1 percent.
He said: It is contradictory for authorities to urge people to save for old age then cut the returns to practically nothing.
Michael Gove has spoken of a new slate of austerity after the Covid-19 outbreak to try and repay the Government debt.
The debt throughout the crisis is soaring, but Mr Gove said, you cannot put a price on lives.
Chris Williamson, chief business economist at data firm IHS Markit, told CityA.M. that the economic data the Government was receiving was consistent with the economy shrinking at a quarterly rate of between 1.5 and two percent in the first quarter.
Yet he said the lockdown measures mean “this decline will likely be the tip of the iceberg and dwarfed by what we will see in the second quarter”. A recession of a scale we have not seen in modern history is looking increasingly likely.
Measures aimed at halting coronavirus caused consumer demand and shop footfall to slump, causing steep downturns for hotels and restaurants and other leisure activities such as sports centres, gyms and hair salons.
The data showed that unemployment was falling at its fastest pace since 2009 in March, despite a huge package of measures from the government and Bank of England designed to support businesses.
Chancellor Rishi Sunak has promised the government will pump more than £350bn into the economy and step in to pay the wages of workers who would otherwise be laid off.
The Bank of England has slashed interest rates to record lows and ramped up its money-printing operations to ensure plenty of credit can reach banks and businesses.
Yet Andrew Wishart, UK economist at Capital Economics, said things are going to get worse for the UK economy.
Speaking to CityA.M. he said: The PMI captures the proportion of firms that report a fall in activity, it doesn’t take into account just how poorly each firm is doing. The fact many firms have had to cease trading altogether suggests things could be even worse than the survey suggests. That’s why we are forecasting a 15 percent fall in GDP in the second quarter.
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