Monday, 18 May, 2020
Telegraph – BoE Haldane: Britain Heading for Eighties-style Unemployment Crisis
By Russell Lynch and Economics Editor
(Telegraph) — Britain is heading for an Eighties-style unemployment crisis with up to half the workforce braced for a hit to incomes, a top Bank of England official has warned.
Andy Haldane, its chief economist, said more than half of the nation’s 33-million-strong workforce was already unemployed, furloughed or working shorter hours as a result of the Covid-19 shutdown.
He said: “The very reason I got into economics and the reason I got into public policy was because of the scarring experience of the early Eighties unemployment which peaked at three and a bit million – and we’re going back to that, basically.
“Those fears are going to be cast over a much wider cohort of the workforce, maybe as much as half of them. We need to find a way of reabsorbing all of that labour as quickly as possible in good jobs.”
Mr Haldane called on the Government to deliver initiatives “that support start-ups, that support scale-ups, that support R&D investment” to help reabsorb jobless workers – but also to focus on its levelling-up agenda “with even greater vigour”.
Travel company TUI and manufacturer JCB have joined the lengthening list of businesses unveiling job losses, while data this week could show 1.2 million new jobless claims in April – doubling the previous total in a month.
Stephen Jones, head of bank lobby group UK Finance, underlined the pressure on households as he said debt advice charities had warned lenders that more than three million people would emerge from mortgage holidays in need of support.
Lenders are looking at rule changes to give customers more flexibility amid a potential “10-fold increase in demand”, according to Mr Jones. He added: “Many will emerge from this crisis with debt they are unable to afford while also having lost their job or seeing their income fall significantly.”
Threadneedle Street is also examining tools such as negative interest rates and expanding the scope of its quantitative easing (QE) scheme “with somewhat greater immediacy” to aid an economy ravaged by the Covid-19 shutdown, Mr Haldane said.
The Bank is already expected to add another £100bn to its £645bn QE purchases in June, ballooning its balance sheet to 50pc of the size of the UK economy, according to Bank of America Merrill Lynch.
Mr Haldane said: “The economy is weaker than a year ago and we are now at the effective lower bound so in that sense it’s something we’ll need to look at – are looking at – with somewhat greater immediacy.”
Sir John Armitt, the UK’s infrastructure guru, echoed the chief economist’s call on levelling up in a letter to Chancellor Rishi Sunak seen by The Telegraph.
The National Infrastructure Commission chairman urged the Chancellor to step up infrastructure spending in left-behind areas as the virus is “only likely to sharpen economic disadvantage in long-struggling communities”.
Sir John said ministers should use short-term stimulus such as speeding up road maintenance spending where possible, but focus on devolving power and funding to regional hubs to improve infrastructure and connectivity over the longer term.
He wrote: “While the impact of Covid-19 on future behaviour is uncertain, I would urge caution over speculation about a flight from the cities post-pandemic, which runs contrary to long-term trends in the attractiveness and resilience of cities.
“Urban public transport investment – and particularly starting to plan now for transformative new projects – remains key to supporting future economic growth and levelling up the country.”
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