The V-shaped recovery is officially dead and we need to avoid scarring

If there was ever any doubt, today we can finally put to bed daft talk of a V-shaped recovery.

GDP for May was worst than practically anyone predicted. Even with the partial opening up of the economy during the month, growth was a puny 1.5%.

And that is before furloughing comes to an end in October.

Even as the Government hands out billions more in support packages for hotels and restaurants in August, racking up borrowing to £322 billion, there is no doubt the country’s bounceback will take longer than the Bank of England’s “V” forecast predicts.

The Chancellor has moved mountains to help businesses get through the crisis. The Office of Budget Responsibility today added another £24 billion to its estimates of how much it’s all going to cost us this year.

But it does nobody any good not to be realistic about the long term damage of what we are going through.

Economists call it “scarring” - the wounds that take years to heal from an economic crisis. The youngsters who can’t afford college, reducing the skills base; the demise of promising young companies inventing tech that could have boosted the country’s prospects; the inability of firms to invest in new kit to boost productivity.

Even in the mid-case scenario from today's OBR report - the one where unemployment "only" peaks at 12% - it says the UK's total output will be cut by 3% in the medium term by such effects

The Chancellor knows all this. It’s the driver behind many of the fiscal measures he’s taken so far.

But he must go further. Boosting capital expenditure allowances and cutting employers’ National Insurance contributions should be next.

Now we know the patient is sicker than we first thought, Rishi Sunak must prescribe even stronger medicine.