Economist cautions UK: "Forecasts are optimistic, downturn could be much worse"
14 April 2020, 16:43
The UK should prepare for a financial crash far worse than predicted by the IMF and UK government.
Richard Murphy is a Political economist, Professor of Practice in International Political Economy at City University and Director of Tax Research UK and he joined Shelagh Fogarty to discuss the impact of coronavirus on the economy.
"The situation is really grim" he admitted. The economist insisted that the scale of the coronavirus crisis was vastly underplayed in the initial stages and we are going to face the implications of it once lockdown is lifted.
On the brighter side, Mr Murphy did agree that there could be a great bounce back after lockdown is lifted, but only if nothing had changed. He pointed out an array of factors that will impact how quickly the recovery will come about.
"Even when we reopen, businesses won't have enough money left" he said, referencing the slow reaction of the government to distribute coronavirus loans, having a knock-on effect on employers, landlords and the wider economy. He also pointed out the grants given to workers losing out on money during this time. He stated that "the reaction is to save" for these people and will result in the economy stagnating.
"If Rishi Sunak missed a trick, what did he miss" Shelagh quizzed. Mr Murphy listed out his own proposals that he called for since the crisis began.
The political economist insisted that there should be mortgage holidays for people in order to limit their outgoings and think of how they can spend their money. He also suggested business and domestic rents to be postponed in a similar fashion.
"Landlords will still have their buildings but may not have businesses to put in them" Mr Murphy noted.
The economist told Shelagh that he believes the government's slow reaction to the crisis has mainly been down to their reluctance to increase debt, as this has been a policy for nearly a decade.
"Not spending now is worse than spending now" he added, insisting that the government has to loosen its purse strings to keep the economy ticking over healthily.