Britain is facing the most severe recession since the aftermath of the First World War, according to the Bank of England.
But the grim prediction is significantly less downbeat than another it made just a few months ago which forecast the worst slump in more than 300 years
The Bank said it expected the downturn and jobs crisis triggered by the Covid-19 pandemic will not be quite as bad as it previously feared. It warned the economy will recover more slowly than hoped, with around 1.2million workers still facing losing their jobs.
Forecasts that the economy will not reach pre-crisis levels until the end of next year appear at odds with recent predictions made by the Bank’s own chief economist, Andy Haldane, that Britain remains on track for a rapid ‘V-shaped’ recovery.
Tom Stevenson, from investment firm Fidelity International, said: ‘The Bank seems a lot less convinced by the prospect of a V-shaped recovery for the UK economy than even just a few weeks ago.’
Canary Wharf on March 19. The Bank of England said it expected the downturn and jobs crisis triggered by the Covid-19 pandemic will not be quite as bad as it previously feared
Passengers sit in a quiet London Underground tube train in London on May 14. Forecasts that the economy will not reach pre-crisis levels until the end of next year appear at odds with recent predictions made by the Bank’s own chief economist, Andy Haldane
Announcing it would keep interest rates on hold at a record low of 0.1 per cent and would not expand its £745billion money printing programme for now, the central bank said it currently expects the economy to shrink by 9.5 per cent this year, before bouncing back by 9 per cent next year, and 3.5 per cent in 2022.
Kirstie: Get back to office to show boss your worth
Kirstie Allsopp at the RHS Chelsea Flower Show last year
Kirstie Allsopp has faced a backlash after she suggested workers should go back to the office if they want to keep their jobs.
The Location, Location, Location presenter said those working from home should be eager to return to the office to ‘prove their worth’.
She wrote on Twitter on Wednesday: ‘If your job can be done from home it can be done from abroad where wages are lower.
‘If I had an office job I’d want to be first in the queue to get back to work and prove my worth to my employer. I am terrified by what could be on the horizon for so many.’
The TV host, pictured, was subject to a wave of abuse from social media users who claimed she was ‘attacking’ people who wished to continue working from home. Some said they did not want to ‘risk their lives’ by going to work.
After the torrent of anger directed at her, Miss Allsopp yesterday said she was taking a break from the ‘toxic environment’ of the social media site.
Yesterday, Boris Johnson said people need the confidence to go back to workplaces in order to help the economic recovery.
During a visit to a housing development in Warrington, the Prime Minister said there were ‘real signs of strength in the UK economy’.
‘Unquestionably it will require people to have the confidence to go back to work in a Covid-secure way,’ he said.
This is a marked improvement on the predictions made in May that the economy would contract by 14 per cent this year, in the worst downturn since the ‘Great Frost’ of 1709.
But it would still amount to the sharpest downturn since the post First World War recession of 1921, with the economy expected to contract by a fifth in the second quarter between April – the first full month of lockdown – and the end of June.
The Bank said the recovery had been ‘earlier and more rapid’ than it had assumed in May as the lockdown eased more quickly than anticipated and household spending, fuelled by a boom in online shopping, had picked up sharply.
But it also warned that the recovery will be significantly slower than it had anticipated back in May, when it said the economy could expand by as much as 15 per cent next year.
And it warned the economy would only recover to pre-pandemic levels by the end of next year, rather than the middle of it.
The Bank also predicted unemployment will almost double to 7.5 per cent by the end of the year, rather than hitting almost 10 per cent as it had previously predicted.
This would be lower than the peak of 8.4 per cent reached in 2011 in the wake of the financial crisis. But the jobless total is still expected to soar by 1.2million to 2.5million – the highest number for seven years.
Average earnings are also expected to shrink for the first time since the financial crisis, with more workers facing a pay cut or pay freezes this year. Andrew Bailey, the Bank of England governor, said: ‘We have had a strong recovery in the last few months. The pace puts the economy ahead of where we thought it would be in May.’
But he added: ‘There are some very hard yards – to borrow a rugby phrase – to come, and frankly we are ready to act should be needed.’ He acknowledged that this could at some point include introducing negative interest rates, effectively forcing banks to pay to deposit money with the Bank of England in order to encourage them to lend this cash to households and businesses instead.
This drastic option, he said, ‘is part of our toolbox but we don’t plan to use them at the moment’.
Mr Bailey also refused to be drawn on concerns that the huge numbers of workers who have not yet returned to the office is contributing to the damage inflicted on the economy.
He backed Chancellor Rishi Sunak’s decision to shut the Job Retention Scheme at the end October, and resist calls from Labour and the Liberal Democrats to extend it for some workers. He told the BBC: ‘I think it is good that he has set out a very clear path. It’s been a very successful scheme. But he’s right to say we have to look forward now and move forward.’
On Wednesday, WH Smith announced plans to lay off 1,500 staff after a slump in commuters and holidaymakers travelling through train stations and airports.
The Bank stressed that its forecasts are more uncertain than usual, given it is impossible to know what course the coronavirus will take. But is stressed the economy is more likely to fare worse than predicted rather than better.
A man wearing a protective face mask walks past the Bank of England in central London on August 6, 2020. The Bank also predicted unemployment will almost double to 7.5 per cent by the end of the year, rather than hitting almost 10 per cent as it had previously predicted
Mr Bailey also refused to be drawn on concerns that the huge numbers of workers who have not yet returned to the office is contributing to the damage inflicted on the economy. He backed Chancellor Rishi Sunak’s (pictured) decision to shut the Job Retention Scheme
Responding to its report, Trade Union Congress general secretary Frances O’Grady said the threat of mass unemployment when the Government’s Job Retention Scheme closes at the end of October has not gone away.
She said: ‘Ministers must act now to save jobs. That means extending the job retention scheme for businesses in hard hit sectors like retail, manufacturing and aviation. Many companies have a viable future but need longer-term support.’
An audit by the Mail published yesterday revealed a roll call of more than one hundred major British firms have already announced plans to lay off around 230,000 staff, including almost 132,000 in the UK.
Some 9.6million workers have been furloughed and are receiving income support from the Government’s Job Retention Scheme at a cost of almost £34billion so far.
The latest casualty … Kate’s fashion favourite Jigsaw
by Tom Witherow Business Correspondent
Jigsaw will shed jobs and shut stores as it becomes the latest high street victim of the coronavirus pandemic.
The fashion brand, owned by Carphone Warehouse tycoon David Ross, has been a fixture in the wardrobes of middle-class British women for 50 years and is a favourite of the Duchess of Cambridge, who once worked in its stores.
The precise number of job losses will not be revealed for a few weeks as it prepares for an insolvency process known as a Company Voluntary Agreement, Sky News reported.
Catherine Duchess of Cambridge visits Henry Fawcett Children’s centre, London, on March 12, 2019, Wearing a Gucci, top, Jigsaw trousers, high-street brand
It follows the collapse of Oasis, Warehouse, Cath Kidston and Laura Ashley which have shed close to 3,000 jobs between them. Jigsaw employs 900 staff.
Last night foreign exchange firm Travelex also went into administration with the loss of 1,300 UK jobs.
The company said it had been ‘acutely’ hit by lockdown and the collapse of travel, along with a cyber-attack on its files this year. Some parts of the business – and 1,800 jobs in the UK – have been saved.
Yesterday, the coronavirus bloodbath continued as Wetherspoon’s announced it would shed up to a third of its head office staff, taking the total jobs toll this week to 8,000.
Jigsaw, founded in Brighton in 1970, was struggling even before the pandemic struck as tough competition in women’s mid-market fashion left the chain nursing losses.
The closure of its 75 stores and concessions during lockdown, together with shoppers’ concerns over the virus, has tipped it over the edge.
Even after it reopened, experts said the cancellation of weddings and events meant shoppers were shunning its tailoring and formal dresses in favour of comfier, casual clothing.
And employees’ failure to return to the office means that working women are not buying workwear.
The store closures have already begun, with closures in Newbury, Berkshire, and Aberdeen.
Jigsaw told customers in Newbury: ‘The UK retail sector has been struggling for some time as customers of all ages move to the convenience of online shopping and the coronavirus pandemic has further accelerated this.
‘We have therefore taken the difficult decision to close a number of our stores and carry out a wider strategic review of our business.’
The chain has been accused of mismanagement after seven directors, including a former aide to Samantha Cameron, left earlier this year.
The controversy centres on Mr Ross, 54, estimated to be worth £600million, who bought the brand two years ago from founder John Robinson.
The tycoon has placed the company up for sale after it made a loss of £10.5million for the year to September 2018.
The plan to close stores, cut rents and shed jobs will take several weeks and will only go ahead if it is approved by three-quarters of Jigsaw’s creditors.
Companies House documents also suggest that Mr Ross was forced to inject a further £7.5million in loans to see Jigsaw through the crisis.
He gave £279,000 to the Conservative Party before last December’s general election and arranged part of Boris Johnson and Carrie Symonds’s holiday to Mustique over New Year.
A Mail audit found 107 of the largest UK companies have cut close to 230,000 jobs since March 23 and at least 132,000 of those are in the UK.