LONDON, 11 Jan (Reuters) – Finance Minister Rishi Sunak warned on Monday that the UK economy will get worse before it gets better, with the country now in a third national lockdown and struggling to contain the spread of COVID-19.
Sunak said the new health restrictions were needed but would have a significant economic impact.
“We have to expect the economy to get worse before it gets better,” he told parliament.
The UK economy looks set to return to recession – shrinking in the last quarter of 2020 and the first quarter of 2021 – following a record 25% drop in production in the first two months of last year’s lockdown.
Earlier on Monday Prime Minister Boris Johnson said Britain was in a “race against time” to launch a COVID-19 vaccine as deaths hit record highs and hospitals were running out of oxygen, and his top medical adviser warned the worst weeks of the pandemic were imminent.
Sunak implied no additional economic support announced before the March 3 budget, outside of last week’s 4.6 billion pound ($ 6.2 billion) package for businesses hit by the new lockdown.
“The budget is the right place to consider (the measures) given the scale of the response and indeed the fact that all our main support has been extended into the spring,” he said after asking for more help from the opposition Labor Party.
The UK’s COVID-19 deaths have soared and now exceed 81,000 – the world’s fifth highest death toll – while more than 3 million have tested positive.
Sunak has previously announced emergency aid to the economy worth £ 280 billion, including a massive job protection scheme that runs through the end of April.
He disputed official statistics showing Britain’s economic output had suffered a bigger hit during the pandemic than almost any comparable country.
“It’s very clear that our way of calculating output is flattering other countries and hurting us in making those comparisons,” he said.
UK statistics show a sharp drop in public sector output during the first lockdown – reflecting reduced capacity of hospitals to perform operations and school disruptions – despite a large increase in overall public spending. (Reporting by David Milliken, written by Andy Bruce; editing by William James and Giles Elgood)