UK Bank Official: COVID-19 Crisis Threatens Jobs, Long-Term Outlook

Alarm is rising in the U.K. as a third national lockdown weakens businesses, threatening millions of people’s jobs. The result could be a jobless recovery, warned a top central bank official.

“As time goes on, corporate balance sheets, especially among small firms are steadily getting worse,” said Michael Saunders, a member of the Bank of England’s Monetary Policy Committee. “The longer the crisis goes on, the greater the risk of long-term scarring effects that will weigh on demand subsequently,” Bloomberg reported.

Saunders spoke at a video conference in London. He said that, while the economy may surge, millions could be left behind.

“Strong quarterly growth rates that leave GDP [gross domestic product] well below its pre-Covid level and unemployment relatively high are not a boom,” Saunders said.

Bloomberg said his speech shows divisions at the central bank over the outlook for the economy. For example, Bank of England Chief Economist Andy Haldane expects a sharp recovery in the second half of the year that would absorb those left unemployed by the COVID-19 crisis.

Saunders spoke at an event sponsored by the Resolution Foundation — which argues that the economy faces further calamity. The fear is that 2.6 million people in the U.K., or 8 percent of workers, could lose their jobs in the next three months.

“There is a less benign [economic outlook] in which rising unemployment itself weighs on spending because fears of job losses make people anxious — keen to ensure their own household budget will be OK — and firms fearing weak demand also don’t hire as much,” Saunders said, according to Bloomberg.

In addition, the foundation said its analysis showed that 2 million people had been unemployed or on furlough for the past six months. A further threat is that government aid programs are slated to end.

Rising concerns take place against the backdrop of economic mayhem during the pandemic. The economy in the U.K. sank 9.9 percent in 2020, the worst such contraction on record since 1709, the Office for National Statistics said.

The overall economic drop in 2020 was more than double that of 2009, when the U.K.’s GDP declined 4.1 percent due to the worldwide financial crisis.