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UK economy could shrink by 35% with 2m job losses, warns OBR | Business

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Britain’s economy could shrink by 35% this spring and unemployment soar by more than 2 million due to the coronavirus crisis, the government’s independent economics forecaster has warned.

In a stark assessment of the economic fallout from Covid-19 as lockdown measures bring much of the country to a standstill, the Office for Budget Responsibility said that gross domestic product (GDP) could plunge by more than a third in the second quarter of the year and by 13% for 2020 as a whole.

Sounding the alarm that the immediate hit to living standards could be worse than the initial shock of the 2008 financial crisis, it said joblessness could hit 10% by the end of June and government borrowing this year would increase at the fastest pace since the second world war.

After a decade of steady job creation to drive unemployment to its lowest rate since the mid-1970s before the coronavirus hit, such an increase in people losing their jobs would return the country to levels last recorded in the early 1990s recession, when Britain crashed out of the European Exchange Rate Mechanism.

The Office for Budget Responsibility is the government’s independent forecaster, which gives its verdict on the outlook for growth and the public finances twice a year.

The forecasts are published to coincide with the chancellor’s two big set pieces of the year – the autumn budget and the spring statement – and takes into account the impact of any tax and spending measures announced in those statements.

The OBR also uses its public finances forecasts to judge the Treasury’s performance against the chancellor’s fiscal targets, stating whether or not it has a greater than 50% chance of hitting the targets under current policy.

It was established in 2010 by the then chancellor George Osborne with the aim of improving the credibility of the government’s official forecasts for growth. The forecasts were previously produced by the Treasury itself and often criticised for being unrealistic.

The OBR is led by three members of the budget responsibility committee, including chairman Robert Chote, a former director of the Institute for Fiscal Studies, with support from the OBR’s permanent staff of 27 civil servants.

The OBR analysis came as countries around the world try to devise exit strategies from lockdown conditions despite a rising global death toll.

With business activity and social life effectively brought to a coordinated standstill in most of the developed world, the International Monetary Fund also warned on Tuesday of an economic slump unparalleled since the Great Depression of the 1930s.

In its half-yearly forecasts, the IMF said the “Great Lockdown” could cause global GDP to contract by around 3% this year. The Washington-based fund had forecast growth of 3.3% this year as recently as three months ago.

Gita Gopinath, the IMF’s economic counsellor, said the size of the hit to the global economy, uncertainty about the how long the shock would last, and the need to discourage economic activity to contain the virus had to led to a crisis “like no other”.

The IMF, which forecast a 2020 drop in UK output of 6.5%, also predicted GDP falls of 9.1% and 8% respectively for Italy and Spain – the two worst-affected European economies from Covid-19 so far – and expects Chinese growth to fall from an expected 6.1% to just 1.2%, its lowest level in decades.

Gopinath warned the declines coud be far larger: “Much worse growth outcomes are possible and maybe even likely.”

The OBR’s gloomy outlook for the UK was published after the foreign secretary, Dominic Raab, warned the country could remain in lockdown for at least another month. The OBR said: “The longer the period of economic disruption lasts, the more likely it is that the economy’s future potential output will be scarred.”

In a grim assessment that depends heavily on how long ministers decide to keep the lockdown measures in place, the OBR scenario assumed that tight controls would be maintained for three months, followed by a further three months when they are only partially lifted.

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The watchdog said it was not attempting to predict what ministers would ultimately decide. Warning that there was a high degree of uncertainty, it said the hit to jobs and growth could be plausibly greater or smaller.

Offering a degree of optimism as the outlook worsens, the OBR said the economy could quickly snap back from the deepest crash in more than a century, with GDP recovering to its pre-virus levels as quickly as the end of this year.

Outlining the escalating risks to Britain from the economic collapse, the government’s forecasters also warned that public borrowing would almost quintuple this year as the government ramps up its emergency support package for struggling households and businesses.

uk recessions graphic

According to the tax and spending watchdog, borrowing could rise to around £273bn, or 14% of GDP.

This would rank as Britain’s biggest peacetime budget deficit, but the OBR said the damage to jobs and growth would have been far greater without the emergency spending package.

The budget deficit would be greater than the one inherited in 2010 by David Cameron’s coalition government following the financial crisis, which encouraged the former Tory prime minister to embark on a painful austerity drive in an attempt to balance the books. Despite a decade of deep cuts to public services, the deficit remained at almost £50bn in the last financial year.

Paul Johnson, director of the Institute for Fiscal Studies, said a complete reappraisal of economic policy would be required once the dust settled on the coronavirus crisis but predicted that a return to austerity was unlikely. “Tough decisions will have to be made which are likely to involve tax rises and higher debt for some time to come,” he said.

Warning that the prospect for jobs and growth could significantly worsen if lockdown measures are extended well into the summer, Johnson added: “We must not underestimate just how staggering these figures are, and by how much the economic outlook has shifted compared to just a few months ago.”

Underlining the tough choices facing ministers over how best to end the steps to curtail social and business activity, the OBR warned that each additional month of tight control would cost the exchequer as much as £45bn of additional borrowing.

As the economy crashes and public borrowing balloons, Britain’s national debt – the sum of every annual budget deficit – is expected to spiral to more than 100% of GDP this year.

Rishi Sunak, the chancellor, said it was clear the coronavirus pandemic would have a very significant impact on the UK economy, just as it would for other nations around the world.

“People should know that there is hardship ahead and we won’t be able to protect every job or every business,” he said at the government’s daily press briefing.

Saying that the OBR forecasts were only a potential scenario, he said the report had confirmed government actions had protected jobs. “If we hadn’t done these things it would mean that things were a lot worse.”

Against a background of mounting concerns over the government’s exit strategy, some observers warned against over-simplifying the argument between balancing economic prosperity with the health of the country.

The Resolution Foundation warned that ending the lockdown now could lead to more deaths in future, as well as the need for a reimposition of tougher lockdown measures that could cause greater economic damage.

Torsten Bell, the thinktank’s chief executive, said: “This should caution against those arguing that policymakers can avoid these costs by simply ending the current lockdown.

“Policymakers should also recognise that these forecasts represent just one scenario for a three-month lockdown. History shows that measures to control a pandemic can in fact last much longer.”

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Missing Dunkirk Swimmer Located, Reported To Be Safe | News, Sports, Jobs

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A swimmer who went missing for more than 30 minutes in Lake Erie, was found and rescued on Sunday afternoon by emergency crews near Point Gratiot.

The major search began when the swimmer reportedly went missing around 3:20 p.m. According to scanner reports, the subject was seen near the cliffs close to the Dunkirk Lighthouse. The individual was later found on a cliff at around 4 and added rescue support was needed to reach him.

The swimmer, according to scanner reports, was a male in his 20s.

Dunkirk Fire Department, the Chautauqua County Dive Team, the U.S. Coast Guard and county coordinators responded to the scene.

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UPDATE: Jamestown Man Killed In Morning Crash | News, Sports, Jobs

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Photo by the New York State Police

A Jamestown man was killed in a one-vehicle crash early Sunday.

A passing motorist around 5 a.m. spotted lights off the road to the eastbound on-ramp to Interstate 86 at North Main Street Ext. A trooper located a 2003 Pontiac Vibe on its side with one person inside.

The driver, later identified as 40-year-old Jeffrey A. Baker, was pronounced dead, the state police said in a news release.

Capt. Eric Balon said the vehicle reportedly entered the on-ramp at a high rate of speed when it left the road and traveled down an embankment.

Firefighters from Fluvanna and Falconer were summoned, as well as Chautauqua County EMS. A coroner was later called to the scene.

The body was taken to the medical examiner’s office in Erie County.

The crash remains under investigation, Balon said.

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More than 139,000 jobs at risk as extent of planned redundancies due to Covid-19 revealed

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Nearly 1,800 UK companies told the government of plans to cut 20 or more jobs in June as the coronavirus wreaked havoc on the country’s economy, figures suggest.

Royal Mail, Centrica and The Restaurant Group – which owns Frankie and Benny’s – were among those announcing four-digit job losses.

The worrying figures come as data obtained by ITV News revealed this week the crippling impact coronavirus is likely to have on towns and cities across the UK. With the full winding down of the furlough scheme by October, more than seven per cent of the UK’s workforce could be unemployed by the end of the year, according to the Bank of England.

Now, figures obtained by the BBC in a Freedom of Information request showed 1,778 companies informed the Insolvency Service of their intention to cut more than 139,000 jobs in England, Scotland and Wales.

This compares to 345 companies announcing a total of 24,000 job losses in June 2019, the broadcaster said.

Biggest job cuts announced during Covid-19 outbreak Credit: PA Graphics

Businesses are required by law to give the Insolvency Service advance notification of potential redundancies where more than 20 staff are to be dismissed in a “single establishment”.

However, companies may not end up making the same number of redundancies as initially suggested and these figures will not contain information of job losses from smaller firms.

The UK economy shrank by more than 20% in the first half of the year due to Covid-19, and grim news has continued with further announcements of job losses seen in the past seven days.

Dixons Carphone, Pizza Express, Hays Travel and DW Sports all announced major redundancies, or plans that could put hundreds of jobs at risk.

It comes as many businesses have to decide whether or not to keep staff who have been on furlough on their books as the Government’s coronavirus job retention scheme starts to unwind.

More than 26,000 jobs were lost at British employers in July, according to analysis by the PA news agency.

Chancellor of the Exchequer Rishi Sunak Credit: Andy Buchanan/PA

Chancellor Rishi Sunak has resisted calls to extend the furlough scheme with targeted measures to stave off widespread job losses, saying the support cannot go on “indefinitely”.

The scheme that has so far cost £33.8 billion supporting the payrolls of 9.6 million workers during the coronavirus crisis has begun tapering off ahead of its scheduled end in October.

But opposition parties are calling for the Government to extend it for the hardest-hit sectors and those plunged into local lockdown, warning the end to the scheme is a “grave mistake”.


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