Second lockdown will have ‘significant’ impact on economy, warns Chancellor

Chancellor Rishi Sunak has warned the second lockdown in England will have “significant additional impacts” on the UK economy, but refused calls to disclose forecasts.

In a letter responding to a request from the Treasury Select Committee for an impact assessment, Mr Sunak said while there will be a hit from the latest restrictions, it is likely to be different to that seen after the spring lockdown.

Writing to the committee’s chair Mel Stride, Mr Sunak said this time schools remain open, while businesses are also more prepared for home working.

But he signalled the new lockdown could heap more misery on Britain’s jobs market and battered company balance sheets.

He said: “The further restrictions announced by the Government will have significant additional impacts on the economy and society.

“However, the Government’s policy is not the same as the previous national restrictions and nor is the environment in which these restrictions are coming into force.”

He added: “Some businesses may be more prepared for working from home than was the case prior to previous restrictions, while the labour market enters these restrictions in a weaker state than in March, and so do corporate balance sheets, including in the worst-affected sectors.”

Mr Sunak batted away demands from the committee for details on the economic impact ahead of Wednesday’s vote in Parliament on the new lockdown.

The Treasury admitted on Tuesday that no formal assessment of the economic cost of England’s second lockdown has been produced.

The Treasury Select Committee had written to Chancellor Rishi Sunak calling for the publication of the work it has carried out on the lockdown, which comes into force on Thursday.

But the legislation stated that “no impact assessment has been prepared for these regulations” and the Treasury said any analysis conducted under the present conditions would be “uncertain and imprecise”.

Mr Sunak told the committee that the Bank of England would be providing its latest forecasts for the economy on Thursday, while the fiscal watchdog – the Office for Budget Responsibility – will give its assessment on November 25.

Mr Stride said it was “essential” the Treasury publishes work carried out on the hit to the economy.

He said: “Whilst the Chancellor has stated that HM Treasury does not prepare formal forecasts on the UK economy, this is not what the Treasury Committee is requesting.

“We know from the Sage minutes that work has clearly been carried out by HM Treasury on the economic impacts of interventions under the auspices of the Government’s chief economic adviser.

“It’s essential that the Treasury publishes this work, and that must be made available for public scrutiny ahead of today’s vote.”

The Bank of England is expected to slash its growth forecasts for the economy on Thursday and pump in another £100 billion of quantitative easing to boost the economy.

Mr Sunak is also due to make a statement on Thursday afternoon on fiscal efforts and support amid the second lockdown.