United Kingdom expected to see worst recession in over 300 years: senior official


Jeremy Stretch, head of G10 FX strategy at CIBC Capital Markets, will be watching how the Bank of England reacts to Sunak's spending plans to see whether it maintains a significant degree of quantitative easing over the medium-term after a larger than expected increase in the support measure earlier this month.

Sir Jeffrey welcomed the governments support for workers through the furlough scheme, but said more needed done to help the aerospace sector.

Northern Ireland Secretary Brandon Lewis said: "Today's announcement by the Chancellor of over £900m additional funding for NI is brilliant news". As a result the output lost during the pandemic won't have been recouped until the final quarter of 2022.

Britain's government reduced its commitment to foreign aid on Wednesday, pledging to spend 0.5% of gross domestic product on aid in 2021 as opposed to the normal 0.7% figure, finance minister Rishi Sunak said.

Over a million nurses, doctors and others working in the NHS will get a rise but pay rises for the rest of the public sector will be "paused" - except for the 2.1 million workers earning below the median wage of £24,000, who will receive an increase of at least £250.

The Chancellor said he "cannot justify a significant, across-the-board" pay increase for all public sector workers in the circumstances. "Long-term scarring means in 2025, the economy will be around 3 percent smaller than expected in the March [2020] budget". "We could only act in the way we have because we came into this crisis with strong public finances and we have a responsibility once the economy recovers to return to a sustainable fiscal position".

"I join others in urging MPs to reject it for the good of the poorest, and the UK's own reputation and interest", he added.

Sterling was slightly weaker on Wednesday as the euro rose and traders waited to see whether Britain will be able to clinch a post-Brexit trade deal with the European Union during this week's negotiations.

Sunak insisted the country had only weathered the pandemic as well as it had due to its low public borrowing, and the government had a "responsibility" to return the economy to a stable state.

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The Chancellor's comments as he unveiled his spending review had echoes of a wider Thatcherite vision of the nation, as espoused by the former prime minister in her famous 1987 interview where she said "there's no such thing as society".

Ministers were warned that economic forecasts by the OBR made for a "sobering read".

"Our health emergency is not yet over and our economic emergency has only just begun", Mr. Sunak said.

The scale of that emergency was chastening even if much of it was expected, and in parts not as truly very bad as the Office for Budget Responsibility had previously forecast.

And unemployment, the devastating human metric of any recession, is forecast to reach 2.6m people next year.

Reports suggest he will cut the level of aid to 0.5 percent in his Spending Review, as the government seeks to support the coronavirus-ravaged economy and looks for savings from an aid budget worth £15 billion ($20 billion, €17 billion).

But remarkably there was no mention of Brexit, or even acknowledgment of the cliff-edge that looms in just 36 days if there is no deal, an outcome the OBR says will cut a further 2% from GDP.

An the Royal College of Nursing's Dame Donna Kinnair said the chancellor had missed the "opportunity to recognise and reward the expertise and dedication of United Kingdom nursing staff today" by failing to specify how much of a pay rise nurses and others would get.