The economy could “easily” contract in the coming weeks by as much as it did in more than a year during the financial crisis, a senior forecaster has warned.
As ministers were being urged to do more to help businesses survive the coronavirus, Julian Jessop, an independent economist, said a 6pc drop in GDP or “even worse” in just one quarter can be expected.
Mr Jessop said his rough calculations, based on estimates that one in five Britons will be unable to work in the coming weeks and policy countermeasures such as last week’s interest rate cut, mean 2020 will be a “write-off” for the economy.
He warned that a plague of bankruptcies of previously healthy companies would make a “swoosh-shaped” recovery in 2021 more difficult.
This weekend there are signs that thousands of companies and millions of jobs are already at risk. Shops, hotels and restaurants face an immediate cash crunch as consumers stay at home.
The latest data shows shoppers have been deserting high streets, with footfall across all retail destinations down 5.8pc on Thursday and 8.3pc on Friday.
Major retailers were last night preparing to ask the Treasury to defer all business rates.
Without government support, the hospitality sector “will run out of cash in about eight to 10 weeks”, said Kate Nicholls, the head of UK Hospitality, a trade body.
High-profile chains could collapse within weeks, with up to two million jobs threatened after room occupancy roughly halved last week.
Restaurant chains are pressing for three-month rent holidays after sales slumped by up to half in the past week, while banking chiefs are lobbying ministers to help them support businesses.
Just days after a Budget that unleashed an arsenal of support for small businesses, they appealed to Rishi Sunak to create “breathing space” with a freeze on measures such as a planned move away from Libor.
The crucial benchmark is used to set the cost of lending between banks but is due to be replaced with a new system.
As well as offering emergency loans to small businesses and promising repayment holidays to hard-up companies, banking insiders said they were making sure online systems can cope with a surge in usage.
Banks are testing what might happen to cash supplies in a lockdown.
One bank chief who attended a crisis summit with the Chancellor said the shock to the economy is “very different to anything we’ve seen”.
Concern is already mounting over Tui, the world’s biggest travel agent. It faces tough talks with lenders at a time of year when travel firms are usually low on cash.
Sources said the FTSE 100 operator was “right up against” strict banking covenants – financial ratios that companies must not exceed – which are due to be tested at the end of this month.
Breaking the rules would leave Tui in default of its loans and spark a further run on its shares.
Utilities are meanwhile scrambling to prepare Britain for lockdown.
Ofgem, the energy regulator, told household gas and electricity suppliers to fulfil customer appointments and maintain service levels.
The National Grid has barred all non-essential staff from entering its control rooms, industry sources said, to avoid an outbreak among its most critical teams.
The centres are responsible for not only distributing electricity around the UK but, in the case of gas networks, they are also tasked with avoiding potentially deadly build-ups.
The outbreak has led to unprecedented numbers of people working from home as firms told some or all of their staff to stay away from offices.
BT said its broadband network was strong enough to cope with the surge in demand as offices send workers home to limit the spread of Covid-19.
Experts warned the crisis was like “9/11 all over again” for the insurance industry, which is bracing for a tidal wave of claims from all sectors.
Additional reporting by Hannah Uttley, Lucy Burton, Oliver Gill, Russ Lynch, Rachel Millard, Ed Clowes, Laura Onita and Alan Tovey