London markets fell this morning after Chancellor Rishi Sunak warned Britain faces ‘hardship ahead’ amid fears the coronavirus lockdown could cause the economy to shrink by a third.
The FTSE 100 of Britain’s leading firms dropped by 33 points or 0.57 per cent to 5,758 shortly after opening today.
It comes after the Office for Budget Responsibility predicted that a three-month lockdown might result in the UK’s biggest economic slump for 300 years.
The independent watchdog said the country’s GDP could contract temporarily by 35 per cent over that time, with unemployment also rocketing by two million.
And the International Monetary Fund warned that coronavirus will exact the biggest toll on the global economy since the Great Depression in the 1930s.
PAST FORTNIGHT: The FTSE 100 fell yesterday but has also been rising over the past fortnight
A man wearing a mask walks past a board showing Japan’s Nikkei 225 index in Tokyo yesterday
The organisation also said the pandemic could potentially hit Britain harder than the Spanish Flu epidemic and First World War in a ‘crisis like no other’.
The falls on the markets in London today come after the Dow Jones Industrial Average closed down 559 points or 2.39 per cent at 23,950 in New York yesterday.
Mr Sunak said the OBR’s forecast was based on ‘just one possible scenario’ – a three-month lockdown followed by three months of gradual return to normality.
But he said the virus would cause major damage, adding: ‘People should know that there’s hardship ahead and we won’t be able to protect every job or every business.’
Chancellor Rishi Sunak warned at Downing Street yesterday that Britain faces ‘hardship ahead’
Speaking at the daily press conference in Downing Street yesterday, he continued: ‘This is going to be hard, our economy’s going to take a significant hit.
One in four top bosses cuts pay in the face of coronavirus crisis
One in four of the biggest companies listed in London has slashed the amount of money paid to chief executives in the face of the coronavirus crisis, according to new research.
However, one company has not announced plans to slash its boss’s pay, despite sending staff home, and three others are paying shareholder dividends despite using the Government’s furlough scheme.
Most bosses at the 25 companies who have cut pay have reduced their salaries and fees by 20 per cent, the same proportion that furloughed workers are forfeiting.
However, some have gone further, according to a survey and analysis of FTSE 100 companies’ announcements by the High Pay Centre.
The chief executive of Rentokil has slashed his salary by 35 per cent, and donated the rest of it to an employee fund.
Ten companies intend to take advantage of the UK’s job retention scheme, which allows businesses to furlough staff with 80 per cent of their salaries covered by the Government. This figure is likely to grow.
Only Whitbread has announced plans to take Government money to furlough workers without confirming that bosses will take a pay cut. However, the company, which owns Premier Inn, said that its remuneration committee, which decides on executive pay, will discuss the issue this month.
‘And as I’ve said before that’s not an abstract thing, people are going to feel that in their jobs and in their household incomes… (but) the measures we’ve put in place can significantly mitigate that impact.’
In a warning that tax rises and spending cuts might be required in future, Mr Sunak said the Government would do ‘whatever we need to right the ship’.
The OBR study found the UK could suffer the deepest economic contraction since the South Sea Bubble crisis of 1720.
But it predicted the economy could ‘bounce back quickly’ provided the lockdown does not go on too long, with GDP – an economic snapshot of the country – potentially returning to pre-crisis levels next year.
And it said that a major Government scheme to protect millions of jobs will prevent a ‘very much worse outcome’.
In the meantime, however, the figures suggest the lockdown is costing £2billion per day.
But Asian markets were up today as recession warnings underlined the economic damage already done even as some countries tried to re-open for business.
China moved again to cushion its economy, cutting a key medium-term interest rate to record lows and paving the way for a similar reduction in benchmark loan rates.
While not unexpected, it did help MSCI’s broadest index of Asia-Pacific shares outside Japan edge up 0.2 per cent to a fresh one-month top.
Shanghai blue chips, however, eased 0.3 per cent. Japan’s Nikkei dipped 0.2 per cent, though that followed a 3 per cent jump the previous session.
Stephen Innes, chief global market strategist at AxiCorp, said: ‘Flattening infection curves and the thoughts of more stimulus have lifted all boats.
‘However, appearances can be deceiving as behind the headlines lie the most gnarly storm clouds building, suggesting there is still much to be worried about.’
Yesterday, the FTSE 100 closed down 51 points or 0.88 per cent at 5,791.
In the US, as some states considered relaxing restrictions, the country’s death toll rose by at least 2,228, a single-day record.
President Donald Trump responded by saying some states could still open shortly or even immediately.
He also temporarily halted funding to the World Health Organization, saying it should have done more to head off the pandemic.