UK economy chaos: Businessman warns how long the Treasury can bailout UK during COVID-19
The UK is expected to see a GDP loss of 35 percent according to the Office of Budget Responsibility (OBR) as a result of the pandemic stopping business.
Businessman Jeremy Warne questioned whether lockdown measures, including the furlough pay scheme announced by Rishi Sunak, are sustainable.
He fears that too long in lockdown is seeing britons “losing the will to work” and a way of working amid the virus is essential to economic recovery.
He wrote in the Telegraph: “Despite the efforts now under way, involving an unprecedented degree of international and corporate co-operation, effective vaccines and antiviral drugs are at least a year away, and it will probably be longer still before they are available at scale.
“We cannot afford such a wait.
“Rather, we have to find ways of living with the virus that are compatible with the resumption of a reasonable degree of economic activity.”
Mr Warner believes that the OBR’s prediction of 35 percent collapse in second quarter GDP is “optimistic.”
He said: “The prevailing view now is that (the OBR’s predicitions) may, if anything, be over optimistic.
“Removal of restrictions is likely to be gradual, rather than all at once, with the fear factor remaining a potent drag on economic interaction for some time to come.
“Whether it can afford to finance livelihoods and businesses through such a prolonged hiatus must be increasingly open to question.
“There is only so long the Government can rely on the Bank of England to keep bankrolling the deficit through asset purchases before it undermines confidence in the wider monetary system, the currency collapses and the economy succumbs to an inflationary calamity.”
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The article paints a grim scenario, where he suggests that people and businesses must be prepared “for an end to (…) various support schemes.”
Warner also explains that the virus has exposed the flaws in the UK’s international economy.
“In our pursuit of cheap consumer prices we’ve traded economic resilience and local production for supply chain efficiency.
“(…) Britain’s ongoing trade deficit is as a consequence one of the worst in the developed world.
“That lack of self-reliance is mirrored in the nation’s very low savings rate.
“Too many citizens live hand to mouth, “just in time” lives, with virtually all income spent and little saved for a rainy day.”
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The article comes after Chancellor Rishi Sunak that he was “deeply troubled” by the OBR’s predictions.
He said on April 14 at a Downing Street press briefing: “This is going to be hard.
“Our economy is going to take a significant hit and as I’ve said before that’s not an abstract thing.
“People are going to feel that in their jobs and in their household incomes.”
When the Chancellor was asked whether austerity might be required to control a spiralling budget deficit, he said the government was still committed to “levelling-up” spending.
Mr Sunak said: “When we come out of this in terms of righting the ship, we’ll have to look at it then.
“Obviously this has cost a lot.
“But as I’ve said before, the best way out of this for all of us is to just grow the economy, which is why trying to keep as much of it as intact as possible at this moment allows that bounce-back when we come out of it and allows us to hopefully snap back to normal as quickly as possible.”
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