The chancellor has warned the public that the UK economy will experience a challenging time as an instigated third national lockdown took its toll on the economy.
“We should expect the economy to get worse before it gets better,” says Chancellor Rishi Sunak in an update to MPs on January 11, 2021.
Economy Will Struggle Before it Gets Better
Sunak said that the restrictions placed on people, businesses, and other sectors were necessary to limit the coronavirus’s spread. However, these restrictions will significantly impact the economy as the first two lockdowns already took their toll on the country.
Just last week, the chancellor launched a £4.6 billion support package for businesses, and he has also previously announced emergency help for the economy worth £280 billion. The latter figure also includes the job protection and furlough scheme, which is expected to run until the end of April 2021.
Sunak also hinted that there would no longer be any support announced before the March 3 budget.
“The budget is the appropriate place to consider those [measures] given the scale of the response and indeed the fact that all of our major avenues of support have been extended through to the spring,” Sunak said via BBC.
However, earlier on January 11, the Federation of Small Businesses said a record of 250,000 small firms are scheduled to close in 2021 due to the coronavirus pandemic and the consequences of the Brexit deal that was just passed in December 2020.
What was revealed is that the public sector net borrowing was estimated to reach £240.9 billion in the first eight months of the financial year, which is from April to November.
This was £188.6 billion more than the same point in 2019, and the highest public sector borrowing in any April to November period since the year 1993.
Also, a 16% increase in gross domestic production between July and September 2020 was not enough to make up for the 18.8% fall seen from April to June 2020. This was also when much of the world’s economy was forced to shut down to limit coronavirus spread.
However, Sunak took issue with the figures showing that the UK economic output had been hit so hard during the pandemic’s height than almost any other European country.
He said: “It is very clear that the way we calculate that output flatters other countries and disadvantages us when it comes to making those comparisons.”
Sunak’s economic update came despite the concern that some hospitals in the UK are just days from being overwhelmed because of coronavirus patients’ sudden rise.
UK Prime Minister Boris Johnson stated on January 11 that restrictions might have to be toughened if ministers think that the lockdown rules are not being appropriately observed.
The Prime Minister said that the UK faces a “race against time” to vaccinate the people, with the worst days of the pandemic expected soon, and more than 81,000 people already have died because of COVID-19.
Around 2.4 million people have already been vaccinated, and 40% are senior citizens, which is considered one of the dangers of contracting the virus.