Yahoo Finance Coronavirus: UK braces for economic hit as lockdown extended by three weeks
The UK’s current lockdown measures will be extended by at least another three weeks, in a bid to contain the coronavirus despite the heavy toll on the economy.
Foreign secretary Dominic Raab, deputising for prime minister Boris Johnson, announced the extension on Thursday at Downing Street’s daily live briefing on the coronavirus.
“We recognise all the economic and social impact the current measures are having,” he said.
Raab set out several new conditions for restrictions being eased, including sufficient NHS critical care capacity, sufficient testing and protective equipment and declining infection and death rates.
With Johnson recovering from COVID-19, Raab had chaired a cabinet meeting earlier in the day where ministers approved the extension of social distancing measures.
When Johnson first announced it on 24 March, he said the lockdown would be reviewed every three weeks. But government officials have warned since it could last six months or longer.
READ MORE: UK could face future tax hikes amid fears of ‘biggest deficit in history’
Carolyn Fairbairn, director-general of the Confederation of British Industry (CBI), said the government had the “full support of business,” but warned the lockdown meant significant challenges for firms.
Many firms accept the necessity of drastic action to contain COVID-19, with at least 13,000 hospital deaths now linked to the pandemic. But the measures will cause firms significant further damage with large swathes of the economy facing unprecedented paralysis and lost income.
Unemployment has already jumped, with many employers laying off staff and up to 11 million workers expected to be ‘furloughed’ on reduced pay as firms’ earnings dry up.
Analysis by the Centre for Economics and Business Research suggests every day of lockdown wipes around £2.4bn off Britain’s economic output.
The government has sought to keep firms afloat and workers in jobs through the lockdown, unveiling an unprecedented package of subsidies, grants and loans.
But business groups warn cash is not reaching firms fast enough, threatening their very survival. Fairbairn said it was “vital” firms received grants next week to pay furloughed workers, and called for clarity on how long such support would last.
READ MORE: Europe’s largest economy Germany extends lockdown to 3 May
Office for Budget Responsibility (OBR) figures this week said UK GDP could fall by a record 35% in the second quarter of 2020 if the lockdown persists until June.
The watchdog said unemployment could rise to 10%, equating to an additional two million people out of work. Separate data from charity Citizens Advice on Wednesday shows the human toll of the crisis so far, with record-breaking visits to its website from people seeking advice on redundancy, sick pay, universal credit, furloughing and paying bills.
UK chancellor Rishi Sunak said earlier this week it was “not a case of choosing between the economy and public health,” however. Lifting restrictions too soon or without sufficient testing and protections could see cases soar, and result in even more or stricter restrictions in future.
Gradual easing of curbs on business and some aspects of everyday life in Spain, Italy, Austria and other parts of Europe are being closely watched by other governments.
The pound had dropped 0.8% against the dollar earlier on Thursday as health minister Matt Hancock said lifting restrictions now would see the virus “run rampant.”
But Michael Hewson, chief markets analyst at CMC Markets, said the decline reflected the dollar’s strength rather than domestic issues, with a longer lockdown largely priced in.
