Coronavirus means recession is ‘quite possible’ economic experts warn

The UK risks tipping into recession if the coronavirus outbreak causes widespread disruption, the Budget watchdog has warned.

Sunak announced a £30 billion spending package to support the economy in the wake of the

In his first Budget, Chancellor Rishi Sunak turned on the spending taps as he acknowledged that "for a period it's going to be tough" with up to a fifth of people off work, supply chains disrupted and consumer spending decreasing.

The Chancellor said there was "likely to be a temporary disruption" to the economy but insisted his plans would bring "stability and security".

The scale of the challenge facing the economy was underlined by the Office for Budget Responsibility (OBR) in forecasts prepared before the full impact of the virus could be known.

The OBR said "a recession this year is quite possible if the spread of coronavirus causes widespread economic disruption".

Meanwhile the OBR also found that the Brexit vote had already caused a 2% hit to the UK economy, while Boris Johnson ’s proposed trade deal with the EU would result in 4% of lost growth over 15 years.

Earlier today Conservative Peer and former Chancellor Lord Lamont told BBC Radio 5 Live it was “quite likely” that the coronavirus outbreak could push the UK economy into a recession.

He said: “I think it is quite likely that we could have two negative quarters which is the technical definition of a recession, I think that’s almost inevitable.

"Europe is going to be very badly affected.  Italy has been struggling against recession, as has Germany recently. 

"They seem very probable to tip into recession. United States economy for all Donald Trump ’s rhetoric has been going quite well but not at the rates historically it has been growing in the past, and the US economy I think will slow down remarkably.

"China has fallen dramatically and whatever we do we are affected by the world climate, and the world economy is slowing down and slowing down quite quickly.”

Growth is expected to fall to 1.1% in 2020, down from 1.2% last year and dramatically lower than the OBR's previous estimate of 1.4% – even without the full impact of coronavirus being reflected in the forecast.

Faced with the crisis less than a month after becoming Chancellor, Mr Sunak set out a £12 billion set of measures targeted specifically at the impact of the virus, along with £18 billion of wider spending plans to stimulate the economy.

The Bank of England also announced an emergency cut in interest rates from 0.75% to 0.25% as part of a co-ordinated move with the Treasury.


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Mr Sunak splashed out with funding for public services, citizens and businesses set to suffer as the outbreak becomes more widespread and restrictions on activities are imposed.

The Chancellor said: "Taken together, the extraordinary measures I have set out today represent £7 billion to support the self-employed, businesses and vulnerable people.

"To support the NHS and other public services, I am also setting aside a £5 billion emergency response fund – and will go further if necessary."

Other plans represented another £18 billion of "additional fiscal loosening" and "that means I am announcing today, in total, a £30 billion fiscal stimulus to support British people, British jobs and British businesses through this moment".

Mr Sunak said he knew how worried people were, but he added: "What everyone needs to know is that we are doing everything we can to keep this country, and our people, healthy and financially secure.

"We will get through this – together. The British people may be worried, but they are not daunted."

The OBR forecasts that to pay for the giveaways, national debt will hit two trillion pounds by the end of the Parliament as borrowing jumps from 2.1% of gross domestic product (GDP) in 2019-20 to 2.4% in 2020-21 and 2.8% in 2021-22.

Despite speculation that he would ditch the framework on spending set by predecessor Sajid Javid , Mr Sunak said that his Budget is delivered "not just within the fiscal rules of the manifesto but with room to spare".

Over the next five years, the Government plans more than £600 billion in capital spending.

And day-to-day spending is also set to grow at an average of 2.8% as the Tories move away from austerity and attempt to shore up support among the former Labour voters who delivered Boris Johnson's election victory in December.

By the end of the Parliament in 2024 day-to-day spending on public services will be £100 billion higher in cash terms than it is today, the Chancellor said.

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