Covid: Treasury tries to limit economic damage second lockdown will cause

  • Video report by ITV News Business and Economics Editor Joel Hills

The government has been resisting a second lockdown precisely because it knows the economic cost will be great.

The new restrictions mean companies will fail and jobs will be lost.

The Treasury is trying to limit the damage. The furlough scheme, which was due to end on Saturday, has been extended by a month and made more generous.

Companies that are forced to close will be offered cash grants of up to £3000 a month. And homeowners will be allowed to take mortgage repayment holidays, up to six months.

But the chancellor is already under pressure to dig even deeper

High street retailers speak of “countless” redundancies in the run up to Christmas and pubs warn of “thousands” of closures.

ITV News Business and Economics Editor Joel Hills explains the economic outlook:

EasyJet says it is likely to cancel all flights in and out of the UK after Thursday and says airlines and airports “urgently” additional financial support.

More broadly, businesses are exasperated with both the short-comings of the government’s Test and Trace scheme and its general handling of the crisis.

The new restrictions in England are potentially ruinous for some businesses but they aren’t quite as severe as those imposed during the first lockdown.

Construction companies and manufacturers are being encouraged to remain open.

And we are all better placed to adapt - a lot of economic activity has moved online and many people have learned to work from home.

People will still spend less money in some areas but they will also spend more elsewhere - £1 less spent in a restaurant isn’t necessarily £1 less spent in aggregate.

The economic “hit” shouldn’t be as dramatic as the one we experienced in March but then that was the deepest recession in modern history.

There are reasons to be hopeful. The prospects for a vaccine in the months ahead look encouraging and consumers are pretty adaptable, spending after the last lockdown came back extremely quickly.

The prime minister is quite right, we will get through this. But winter is going to be unpleasant and some will experience hardship.