Rishi Sunak has warned that Britain is facing “a severe recession the likes of which we haven’t seen” as coronavirus cripples the economy.
The chancellor tolled the bell that worse is to come as figures showed a staggering 10 million UK jobs are now directly supported by the government.
Over two million people claimed unemployment benefit and universal credit in the last month with applications rocketing by 69 per cent, new figures covering the first full month of the coronavirus lockdown show.
The data from the Office for National Statistics shows the claimant count climbed by 856,500 to 2.1 million between March and April.
Treasury figures published on Tuesday also confirmed that over 8 million people are on furlough, having 80 per cent of their wages paid by the state until August at a cost of £11.1 billion.
Another two million self-employed people have been given a three month grant to cover their lost wages until June, costing a combined £6.1 billion in support, the Treasury said.
Although there may be a cross-over in universal credit claims by people in work a total of 12 million workers, almost a third of the workforce, are being cushioned by the government.
In a frank assessment Sunak told the Lords economic affairs committee that the “jury was out” on what the economy would look like after lockdown is lifted.
He said: “Although we have put unprecedented mitigating actions in place, I certainly won’t be able to protect every job and every business. We’re already seeing that in the data, and no doubt there will be more hardship to come.
He added: “This lockdown is having a very significant impact on our economy. We are likely to face a severe recession, the likes of which we haven’t seen, and of course that will have an impact on employment.”
Sunak said that by the end of the year he expected unemployment to be in double figures.
Separate unemployment data released on Tuesday showed the number of people unemployed rose by 50,000 to 1.35 million in the three months to March just as the impact of the pandemic first started to be felt.
The figures to the end of March only include two weeks of lockdown and the 3.9 per cent unemployment figure was lower than many predicted.
But economists warned the jobless figures will soar to 1980s levels later in the year as the effect of the coronavirus lockdown is felt.
Tej Parikh, chief economist at the Institute of Directors, said: “Even before lockdown, coronavirus was threatening to take the shine off the UK’s sterling jobs record, and initial estimates for April don’t make for easy reading.
“It’s clear that, without the Government’s furlough scheme, the picture would have rapidly deteriorated even further.”
The Bank of England’s chief economist, Andy Haldane, yesterday warned of a return to the soaring unemployment levels of the 1980s as lay-off from major companies piled up.
Ovo Energy, which took over Scottish and Southern Electricity announced the loss of 2,600 jobs on Tuesday.
In recent weeks British Airways has announced it will shed 12,000, Ryanair some 3,000 workers, P&O Ferries are losing 1,100 staff and JCB is making 1,500 workers redundant.
Fiona Cincotta, financial market analyst at Gain Capital, said the 2.1 million benefit claimants was a sign that the recession would be worse than the 2008 banking crash.
She said: “To put this into context, at the peak of the financial crisis jobless claims hit a high of 136,000.
“The surge in people submitting benefit claims last month came as the virus took its toll on jobs and despite the Government’s job retention scheme. This figure is going to get worse before it gets better.”
Vacancies having also fallen off a cliff to 2008-9 levels, with one million about to join the job market from schools, colleges and universities.
The new data was published as the Resolution Foundation think tank found that young people and the over-60s were already being hard hit by the economic effects of the pandemic.
The group found that 35 per cent of 18-24 year olds were already earning less than they did before the outbreak, while those over 60 are the next most likely to be receiving less pay, with 30% saying they had taken a cut.
Fewer than a quarter, 23 per cent, of 35-49 year olds said they were now earning less than before the crisis.
