Coronavirus: Treasury officials draw up plans to protect economy as Budget looms

New chancellor Rishi Sunak rushes out statement insisting he is ready for the financial backlash from the virus

Rob Merrick
Deputy Political Editor
Monday 02 March 2020 20:48
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Treasury officials are drawing up plans to shore up the economy as fears grow that the growing coronavirus crisis will deliver a hit to prosperity.

Rishi Sunak, the new chancellor – little more than a week before a crucial Budget – has been forced to rush out a statement insisting he is ready for the financial backlash.

Amid falling stock markets, economists have warned of a possible global recession as consumers cut spending and companies' supply chains struggle to cope with factory shutdowns.

Now Mr Sunak is understood to be preparing to make alterations to his Budget plans, while delaying some major decisions until later in the year because of the mounting uncertainty.

“We understand that people across the country are worried, but I assure you that we are taking firm action to support your families, your businesses and the public services on which you rely,” he said.

“We are well prepared for this global threat and, as the wider economic picture becomes clearer, we stand ready to announce further support where needed.”

The chancellor said he had asked his officials to prepare measures that might be needed to support the NHS, businesses and the wider economy.

The comments came after Mr Sunak briefed Boris Johnson and other ministers at the COBR meeting that agreed an action plan to be published on Tuesday.

The health department has said it will fund urgent changes to physical infrastructure and has set aside a further £40m for vaccine development.

The Treasury said it would “make further announcements of support in the next week as and when they are required”.

The independent Office for Budget Responsibility is expected to make changes to its economic forecasts, when it publishes them immediately after Wednesday’s Budget

Paul Johnson, director of the Institute for Fiscal Studies, said: “The chancellor will need to say how it creates further uncertainty,”, adding: “There is also going to be a hit to growth.

The Centre for Economic and Business Research said that, if London was locked down, manufacturing, catering and traditional retail would be worst hit because staff could not switch to remote working.

Given the importance of London to the British economy, quarantining the capital “would result in UK output falling by 6 per cent over the period of lockdown”, the centre said.

A £10 billion loss of GDP would shave several tenths of a percentage point off growth – when the UK is expected to grow by only around 1.2 per cent this year.

The economy has been in the doldrums since the 2016 Brexit referendum, with the continued threat of a no-deal outcome at the end of 2020 still hitting investment and growth.

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