The wage support scheme may "face a strong headwind"
Rishi Sunak's wage subsidy scheme to save jobs could "face a strong headwind," according to leading economists, - Daily Telegraph reports. Almost a million jobs in the UK could be lost as a result of the Covid-19 outbreak, even despite Chancellor Rishi Sunak's massive wage subsidy scheme, experts warn.
Economists are preparing for hundreds of thousands of lost jobs, which could push the unemployment rate from the current 3.9% to 8% after the financial crisis.
John Philpott, a former labor economist with the Jobs Economist consulting firm, said: "It's safe to say that millions of jobs have already been lost, but I'm afraid the numbers won't go down even with a generous wage subsidy. The scale is starting to look worse every day, so I am afraid that even a good policy response will face a strong headwind.
David Page, chief economist at AXA Investment Management said: "The authorities are working hard to avoid an unfavorable scenario in the labor market, but moving towards 8% is not an option, given the unprecedented nature of shock.
Mr. Sunak was warned that his plan to support workers could have unintended consequences
Previously, the Chancellor had promised to pay up to 80 per cent of wages and £2,500 per month to employees who were not working to keep their jobs.
The Tax Research Institute expressed concern about the development of a package of measures to protect workers, warning that it could encourage businesses to temporarily dismiss employees.
"This policy provides a very clear incentive to fire half of them and keep them full-time," said Paul Johnson, director of an influential think tank.
If 10% of the British workforce were to suffer, these measures would cost around £10 billion over three months, IFS estimates.
Experts also warn that job losses will be exacerbated by the heavy impact on labor-intensive consumer industries amid an economy facing potential double-digit cuts over the next quarter. "Leisure, retail and tourism sectors will bear the brunt," said Neil Shiring, chief economist at Capital Economics.
Following Mr Sunak's aid package, Capital has revised its estimate of a sharp rise in unemployment to 6 per cent - although an increase to that level would still result in some 600,000 job losses. JP Morgan's economists estimate that about 80,000 jobs have already been lost as a result of the UK unemployment outbreak.
Closing schools all over the UK, also will hit the economy
According to Samuel Tombs, an economist with the Pantheon Macro, more than 2 million people, or about 6 percent of the workforce, are likely to be disabled to care for children.
Over the past week, economists have shown a huge downturn in the UK economy, while Wall Street analysts predict an annual hit, even bigger than the financial crisis.
Morgan Stanley warned that after a deep recession in the first half of the year, GDP will decline by 5.1% in 2020. A strong rebound in the second half of the year will not prevent the worst recession in a century.
Government efforts to mitigate the economic impact of this crisis are expected to bring the deficit to the level last seen during the financial crisis. Andrew Wishart, an economist at Capital Economics, warned that the UK's deficit will increase to at least 8% of GDP in 2020-21 as tax revenues fall and the government supports workers and businesses.