12/01/2021 3:39 AM AEDT | Updated 12/01/2021 5:04 AM AEDT

Covid Damage To UK Economy Will 'Get Worse', Rishi Sunak Says

Chancellor tells Commons 800,000 people have already lost their jobs and the "road ahead will be tough" in 2021.

Chancellor Rishi Sunak has warned that the Covid-hit UK economy will “get worse before it gets better”. 

Updating MPs on the dire outlook for the country, Sunak revealed 800,000 people had already lost their jobs since February. 

But, with the third lockdown set to last into spring, Sunak told the Commons on Monday the “road ahead will be tough” in 2021 and “difficult” decisions were necessary. 

It comes amid fears the UK could face a double dip recession after the more transmissible strain of coronavirus took hold in Kent in December. 

Sunak told he Commons the “new national restrictions are necessary to control the spread of the virus”, but said they “will have a further significant economic impact”.

“We should expect the economy to get worse before it gets better.”

The furlough scheme was extended until the end of March in December, but Sunak did not use his Commons update to offer any further support to the self-employed and groups excluded from his previous bailouts. 

He said the government had pumped £280bn into supporting jobs and public services during the pandemic. 

Sunak said: “Many people are losing their jobs, businesses are struggling, our public finances have been badly damaged and will need repair.

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Closed shops and quiet streets on Oxford Street in central London, as the UK enters a new national lockdown aimed at curbing the spread of Coronavirus. Picture date: Wednesday 6th January, 2021. Photo credit should read: Matt Crossick/Empics

“The road ahead will be tough. Now, it is time for responsible management of our economy, taking the difficult but right long-term decisions for our country.” 

How the government steers the UK out of debt and recession will be a key test for Boris Johnson’s administration. 

The prime minister had pledged no return to austerity and the cabinet faces pressure to stick to election promises to “level up” the country. 

Responding to a question from Conservative former minister Liam Fox, who called on Sunak to “resist any calls” for more public spending at the budget in March, Sunak said “this must be a private sector-led recovery”, adding: “Government can’t and shouldn’t do everything.”

Labour’s shadow chancellor Anneliese Dodds, responding to the update, accused Sunak of being “nowhere to be seen” when the prime minister announced the latest lockdown earlier this month.

She said his “sole contribution to a set of announcements that had profound implications for our economy was a 90-second video on Twitter”, which she claimed failed to answer businesses’ concerns. 

She added: “Today the chancellor appears out of ideas, urging us to look towards the sunny uplands but providing nothing new. The purpose of an update is to provide us with new information, not to repeat what we already know.”

She continued: “Will we have to wait until the budget for a recognition of all of these problems and solutions to them?”

The next budget is due to take place on March 3. 

Dodds added Sunak should do more to support working parents and the self-employed. 

She said: “The people of Britain understand that they have to make sacrifices.

“They’re doing their bit for the national effort, while the vaccine is rolled. They’re fulfilling their side of the bargain. The chancellor must fulfil his.”