'There will be hardship ahead,' Chancellor warns, as economic impact of virus is laid bare
Chancellor Rishi Sunak has warned he cannot protect every job, business, or charity, as it was revealed the soaring cost of covering wages for those not able to work would reach more than originally expected.
Think tank the Resolution Foundation found that the Government’s plan to cover 80 per cent of the salary of furloughed workers could cost up to £40bn in just three months as more companies decided to take up the scheme than originally expected.
While the Institute for Fiscal Studies (IFS) said the health of the nation will face a double blow, first from the coronavirus itself but then from the economic disaster expected to follow.
It comes as Prime Minister Boris Johnson spent a fourth night in hospital, a third in intensive care.
His condition was said to be “improving” and he was sitting up in bed speaking with staff.
A Downing Street spokesperson said last night: “The Prime Minister continues to make steady progress. He remains in intensive care.”
However the Department of Health said yesterday a further 938 people had died in hospital from the virus.
The figure includes deaths that occurred in the past few days and weeks, but have only now been reported by hospitals.
The total number of people who have now died after testing positive for the virus in English hospitals is 6,483, with at least 456 of those in Yorkshire.
And Mr Sunak warned yesterday warned that the economic impact of the coronavirus outbreak would result in real hardship for people.
“This will have a significant impact on our economy – and not in an abstract way,” he said.
“It will have an impact on people’s jobs and their livelihoods. That is why we have taken the actions we have in order to help mitigate some of that. I believe we are doing the right things. I can’t stand here and say there isn’t going to be hardship ahead because there is.”
But he said he could not save every job, business or charity with his emergency measures. Asked if some are falling through cracks and whether he needs to take urgent action for those not covered by his schemes, he said: “I’ve been very clear and very honest that this will take a significant impact on our economy.
“In spite of what are unprecedented measures in scale and scope, I can’t stand here and say I can save every single job, protect every single business or indeed every single charity. That’s just simply not possible.”
His comments came amid research from the University of Sheffield which found almost 70 per cent of the UK’s smallest businesses expect to lose more than half of their annual turnover due to the coronavirus crisis.
Professor Tim Vorley, Chair in Entrepreneurship at the University of Sheffield, led the study into microbusinesses, conducted in association with Small Business Britain.
He said: “Much of the government’s focus so far has been on SMEs and larger companies, but micro businesses represent a significant proportion of our economy, and are especially vulnerable to this unprecedented socio-economic shock.”
Dr Cristian Gherhes, a Research Associate at the University of Sheffield, said: “Our research is revealing that confidence among the UK’s smallest businesses is at rock-bottom, with most expecting to see more than half of their gross income wiped out by the coronavirus crisis.
“Most of these businesses don’t want to give in to the pressure of the pandemic. But they urgently need further support and clarity over when funds are going to be made available if they are to survive the crisis.”
While analysis of new data from the British Chambers of Commerce (BCC) the Resolution Foundation found between £30bn and £40bn could flow from Government coffers as at least a third of workers in the private sector are likely to be sent home.
Although expensive, the social cost of millions going unemployed without the Government guarantee would be “far, far greater”, said Torsten Bell, chief executive of the Resolution Foundation.
Without it, workers face “catastrophic hits to their living standards”.
And IFS found the economic downturn expected to follow the crisis will have persistent negative health effects.
Heidi Karjalainen, a Research Economist at IFS, said: “The health impacts of the economic downturn caused by the coronavirus pandemic will be felt long after the social distancing measures come to an end.
“Many of those who are most exposed to the economic shutdown – such as low income families, especially those with young children – are also most vulnerable to long-term effects on both physical and mental health.”
Ms Karjalainen said Government could protect the most at risk of the negative economic impacts, which would also minimise the effects on their long-term health.
The Government is being urged to set up a “Cobra for jobs” to deal with the employment impact of coronavirus.
The Institute for Employment Studies (IES) estimated that employment has fallen by around 1.5m to two million over the first month of the crisis, equivalent to five per cent of all those in work.
This would be double the fall in employment in the last recession, said the IES.
Unemployment has already increased to at least 2.5m, or 7.5 per cent of the workforce, it was estimated.
There is clear evidence that prolonged spells of unemployment, particularly while young, can cause long-lasting scars on an individual’s future earnings, employment prospects and health and wellbeing, said the report.
The IES said early analysis suggests that groups at particular risk in this recession are likely to be young people and the lowest paid, with women more adversely affected than men.
IES director Tony Wilson said a back to work campaign was needed, adding: “We recommend that government brings together a ‘Cobra’ for jobs, to work together on designing, co-ordinating and mobilising this response, and convening a wide range of partners including government departments and agencies, local government, sector bodies, trusts and foundations and key stakeholders.
“The proposals will help to ensure that as the economy recovers we can keep people attached to work, help them find better work, and minimise the ‘scars’ from being out of work.
“With a cost of around £4.7bn over the next three years, the evidence from previous programmes tells us that this investment would more than pay for itself in the future, while the evidence from previous recessions tells us that the costs of inaction would be far higher.”