The chancellor Rishi Sunak has warned of a recession the ‘likes of which we have never seen’ and said an immediate bounce back is ‘not obvious’.
He said those hoping for a V-shaped recovery – one which is steep and quick – as the country emerges from lockdown may not get what they’re hoping for.
He said: ‘Obviously the impact will be severe. We are likely to face a severe recession the likes of which we have never seen.
‘It is not obvious that there will be an immediate bounce back.’
Sunak was speaking to the Lords’ economic affairs committee and added that the economy is likely to see a huge downturn.
Businesses across the country have closed, sending home eight million employees to pick up 80 per cent of their pay cheque from the government’s furlough scheme.
The Treasury revealed yesterday that more than £11.1bn had been claimed so far through the coronavirus job retention initiative.
Meanwhile, hundreds of thousands of businesses have received more than £22bn in three government-backed loans from their banks to help them through the crisis.
He said the best way to support some of the hardest-hit businesses – such as restaurants – will be to help them reopen.
The chancellor pointed out that some of the worst-hit businesses are those that employ lower earners and young people
He said: ‘It is critical, both for economic and social justice reasons, that we get those people back to work.’
There was no mention of rumoured tweaks to the government’s loan schemes, which were reported at the weekend.
Larger car dealerships and manufacturers were rumoured to get access to larger government-backed loans.
Currently, companies with a turnover of more than £250m – which will include many medium to large sized dealer groups – can apply for £50m in bank loans backed by the government. However, firms have warned this will not be enough to get them through the crisis.
The FT reported that changes to the Coronavirus Large Business Interruption Loan Scheme (CLBILS) could see the amount companies can borrow quadruple to £200m.
Speaking about the government’s loan schemes in general, the chancellor said: ‘We have the coverage that we want across all our loan schemes, so there isn’t any need for any more changes.’
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