Chancellor Rishi Sunak has announced that there will be a public sector pay freeze, along with a cut to foreign aid spending, and the UK’s borrowing forecast is to hit £394bn.
This is the highest recorded level of borrowing during peace time, and he said that the “economic emergency has only just begun.”
By next summer Sunak told MPs in the House of Commons that the Office for Budget Responsibility (OBR) are expecting unemployment to skyrocket to a peak of 2.6m.
There will be a contraction in the UK’s economy which is forecast to be 11.3%, which is the largest in over 300-years.
The Chancellor said, “Even with growth returning, our economic output is not expected to return to pre-crisis levels until the fourth quarter of 2022.
“And the economic damage is likely to be lasting. Long-term scarring means, in 2025, the economy will be around 3% smaller than expected in the March budget.”
During his 25-minute speech to the Commons he said the government are providing £280bn during 2020 to get the country through the pandemic.
Once restrictions are lifted the OBR predicts the economy will start to recover by 5.5% in 2021, 6.6% in 2022, then by 2.3%, 1.7% and 1.8% in the coming years.
Underlying debt is forecast to be 91.9% of GDP for 2020, which will continue to rise to 97.5% GDP in 2025 to 2026.
National living wage will rise by 2.2% to £8.91 per hour.
Paul Evans, regional director for London at Lloyds Bank Commercial Banking said, “The Chancellor’s announcement of a new National Infrastructure Strategy will be welcomed across London, with long-term investments in its housing, transport and climate sectors set to create jobs and contribute to the capital’s economic recovery. It has been an extremely challenging year for the city’s businesses, but these plans for an investment boost, coupled with the exciting news of imminent vaccines, will go a long way to ensuring a more positive outlook for 2021.”