[To be published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i)] Government of India Ministry of Finance

Are we improving ourselves?

Recessions tend to centre on one part of the economy; coronavirus has hit them all. The road to recovery will be long

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In a way, Britain should have been the country best prepared for the devastating impact of Covid-19 on the economy, because throughout 2019 barely a day went past without someone popping up to warn of the dangers of a cliff-edge Brexit.

But there are cliff edges and then there’s falling off the cliff, and not even the most pessimistic remainer would have been willing to predict what has happened since the UK went into lockdown at the end of March. While most of the attention has been focused – quite rightly – on the medical emergency, the economy has collapsed.

Threadneedle Street says the economy hasn’t been as bad as this for 300 years – so it can only can get better

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It’s hard to be all that cheerful when you are bracing yourself for the biggest annual contraction in the economy since before the South Sea Bubble crisis of 1720, but somehow or other the Bank of England has managed to find some nuggets of hope amid all the gloom.

To be sure, the short-term news from Threadneedle Street was as grim as everybody had expected. Having fallen by 3% in the first three months of 2020, activity is projected to drop by a further 25% in the second quarter and by 14% over the calendar year.

Related: Don't expect a snapback for the UK economy after lockdown is lifted | Larry Elliott

One of the two main definitions of recession in the UK is at least two quarters of negative economic growth. Judged by this yardstick, the UK was last in recession in 2008-09, when there were six consecutive quarters of negative growth. 

Bank outlines scale of Covid-19 shock in 2020 with forecast for deepest recession in 300 years

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The Bank of England has warned the British economy could shrink by 14% this year and unemployment more than double by spring as the coronavirus causes the deepest recession in modern history.

Leaving interest rates on hold at a record low of 0.1% as the economic crisis unfolds, the central bank said economic activity across the country had fallen sharply since the onset of the global health emergency and the lockdown measures to contain its spread.

Related: Don't expect a snapback for the UK economy after lockdown is lifted | Larry Elliott

Related: Bank of England warns UK economy could shrink 14% in 2020 amid Covid-19 downturn - business live

Related: Bank of England warns UK economy could shrink 14% in 2020 amid Covid-19 downturn - business live

Britain’s central bank warns that the spread of Covid-19 and the measures to contain it could wipe 14% off UK GDP this year

• Latest: More than 3m Americans filed jobless claims last week
• UK could shrink 25% this quarter, Bank warns
• Bank predicts 14% fall in GDP in 2020 and rising unemployment
• BoE leaves interest rates at 0.1%, QE at £645bn
  
• Coronavirus – latest updates
• See all our coronavirus coverage

5.13pm BST

Time to recap

Britain is facing its worst recession in 300 years, according to the latest scenario from the Bank of England. The BoE estimates that GDP will plunge by 25% this quarter, with unemployment hitting 9%, due to the abrupt halt to activity under the Covid-19 lockdowns.

Related: UK unemployment to double and economy to shrink by 14%, warns Bank of England

New unemployment claims filed in the past 7 weeks:

Week ending...
March 21: 3.3 million
March 28: 6.9 million (**a record**)
April 4: 6.6 million
April 11: 5.2 million
April 18: 4.4 million
April 25: 3.8 million
May 2: 3.2 million

Total: Nearly 33.5 million Americans w/out work pic.twitter.com/KZonDSSPG7

US Initial Jobless Claims fell to 3.2m, down from the previous week’s figure of 3.8m and half the peak recorded 5 weeks ago, but roughly in line with economists’ forecasts. These figures support estimates of the April unemployment figure, to be released tomorrow, to reach a shocking 16%.

“Markets, however, are now looking beyond the employment data and forward to the potential recovery. With some US states now beginning to reopen for business, investors will be watching closely to see how quickly employees return to work and how rapidly economic activity bounces back.

4.46pm BST

A late rally has lifted the UK stock market to its highest level in a week.

The FTSE 100 has just closed 82 points higher at 5935, a gain of 1.4%.

4.29pm BST

The International Monetary Fund says it has approved requests for emergency pandemic aid totalling $18bn, from 50 of its 189 members, and is working through another 50 requests.

Reuters has more details;

The IMF’s executive board was working through requests at record speed and would consider a request from Egypt for both emergency financing and a stand-by lending arrangement on May 11, spokesman Gerry Rice told reporters in an online briefing.

“It’s an IMF moving at an unprecedented speed in an unprecedented way to meet this unprecedented challenge which we’re all facing,” he said, noting the Fund had also temporarily suspended payments on IMF debts for 25 of the poorest countries.

3.50pm BST

The gloom in the luxury goods sector is deepening even though some countries have started to relax their coronavirus lockdowns.

“As consumers slowly emerge from lockdowns, the way they see the world will have changed and luxury brands will need to adapt.

Safety in store will be mandatory, paired with the magic of the luxury experience: creative ways to attract customers to store, or to get the product to the customer, will make the difference.”

3.47pm BST

Ronald Temple, Head of US equity at Lazard Asset Management, doesn’t share the exuberance in the markets today.

“The US labor market is in the worst position since the Great Depression and is unlikely to improve sustainably anytime soon. Until widespread testing, an effective therapy, and a vaccine are in place, any improvement in employment is likely to be temporary.

Premature efforts to reopen economies undermine our progress in controlling the pandemic and risk extending the duration of the downturn.”

3.46pm BST

The Nasdaq has shrugged off Covid-19 fears because investors are rushing into “giant tech names that are considered more resilient in this crisis”, explained Marios Hadjikyriacos of XM.

That includes Amazon (up 27% this year) and Microsoft (up 16%).

2.53pm BST

Remarkably, the US Nasdaq index has now caught up all this year’s losses.

The tech-focused share index is now flat for 2020, thanks to strong recoveries in major technology companies such as Apple, Amazon and Microsoft.

The Nasdaq is positive for the year. pic.twitter.com/HtkHzXAzEd

2.34pm BST

As expected, the US stock market has indeed jumped in early trading.

Jobless claims should be back below 1M by the 2nd or 3rd week of June; the rate of decay is quite consistent. pic.twitter.com/OtOoeir28P

2.18pm BST

European stock markets are holding onto their earlier gains, despite the latest grim US jobs data.

Wall Street is expected to open higher too, with the Dow up around 1% in pre-market trading.

Repeat after me.

Equities are forward looking jobless claims backward.

Therefore entirely normal at times for them to move in different directions. And yet we get the same old headlines asking why.

2.01pm BST

The spectre of unemployment is haunting America - but in some states more than others:

Jobless Claims Since March 20th as a Percent of Total State Employment: pic.twitter.com/me0mbMFvQj

1.58pm BST

Before the Covid-19 crisis began, America had never lost a million jobs in a single week before.

It has now suffered seven consecutive weeks of massive job losses, as firms have slashed staff under the coronavirus lockdown.

33.5 million Americans have filed jobless claims over the last 7 weeks. https://t.co/WIOd3ZzpVq pic.twitter.com/8vqdipxopI

1.42pm BST

Our US business editor Dominic Rushe says some US states are really struggling to cope with the unprecedented surge in unemployment.

He writes:

The pace of layoffs has overwhelmed state unemployment systems across the country. Over a million people in North Carolina have now made unemployment insurance benefit claims, equivalent to 20% of the state’s workforce.

Some 4 million have applied in California and the state’s jobless benefits fund is “very close” to running out, governor Gavin Newsom said this week.

Related: Coronavirus: three million more Americans file for unemployment

1.41pm BST

Some instant reaction to the latest US jobless report:

The effects of the #coronavirusrecession continue to ripple through the economy. In the week ending in May 2, 3.2 million workers filed for initial unemployment benefits, according to the @USDOL’s Weekly #unemploymentinsurance (UI) claims report. 1/3 pic.twitter.com/XUFFtG3Rpp

3.17 MILLION people filed for first-time unemployment benefits last week. Almost 33.5 MILLION filing jobless claims in 7 weeks. 1 in 5 Americans unemployed. These are lives and family shaken, devastated.

Though still tremendously elevated, the 3.2 mln new unempl claims continues downward trend as initial surge passes. But # of Americans receiving jobless benefits, pierced 22 mln. pic.twitter.com/b4SF5apZR6

1.33pm BST

Newsflash: Another 3.1 million Americans filed new claims for unemployment benefit last week, as the US jobless crisis rages.

That’s down from 3.8m in the previous week, but still another awful number.

Unemployment Insurance Weekly Claims

Initial claims were 3,169,000 for the week ending 5/2 (-677,000).

Insured unemployment was 22,647,000 for the week ending 4/25 (+4,636,000).https://t.co/ys7Eg5LKAW

1.28pm BST

Stocks are continuing to rise in London, seemingly lifted by hopes that some UK lockdown restrictions will be eased soon.

The FTSE 100 is now up 63 points or 1.1% at 5917, after the government confirmed that Boris Johnson will reveal his strategy on Sunday evening:

NEW: Boris Johnson will be giving a statement at 7pm on Sunday discussing the route out of the #COVID19 lockdown and the government's next steps.

With oil, mining and banking stocks all in the green, the FTSE added another 0.9% as the session went on, sticking its nose across 5900 for the first time in a week. This would suggest that investors have swallowed the bitter 14% contraction in 2020 pill offered up by the BoE, thanks to the spoonful of sugar that is the expectation of a 15% rebound in 2021.

Elsewhere the markets were just as perky, investors continuing to express their relief at the various ongoing and soon-to-be unveiled lockdown-easing measures around the globe. The DAX passed 10700 as it climbed 0.8%, while the CAC struck 4470 following a 50 point increase.

1.04pm BST

12.48pm BST

Our economic editor Larry Elliott says the BoE is pinning its hopes on a V-shaped recovery to GDP - and pushing banks to do their bit.

One of the key messages from the Bank to the high street lenders was that they stand to lose more by not lending than they will by lending freely, because there will be more long-term scarring of the economy, more companies going bust and more losses for them to swallow. At his press conference, the Bank’s governor, Andrew Bailey, said he was ramming home this point to lenders at at every opportunity.

Forecasting is tough at the best of times: in the current circumstances – where there is uncertainty about how fast restrictions will be lifted, how consumers will behave, and whether there will be a second wave of infection – it is all but impossible.

All that can really be said is that the risks to the Bank’s scenario are skewed heavily to the downside. Threadneedle Street decided against providing more stimulus at this week’s meeting, but it is only a question of time.

Related: Bank of England offers hope amid Covid-19's grim economic spectacle

12.35pm BST

New: BoE governor Andrew Bailey tells me while it's unlikely, he doesn't rule out cutting UK interest rates into negative territory (unlike M Carney):
"Previous governors didn't have in mind this scenario we're in today. And I think it's wise not to rule anything off the table."

12.33pm BST

Bank of England governor Andrew Bailey has told Sky News that the slump in the UK economy this year is “unique, certainly in modern times”.

But he’s also optimistic that activity is likely to recover “much more quickly” than after a normal recession:

.@bankofengland Governor Andrew Bailey says despite the "unique" challenges of #coronavirus, he believes the lifting of the lockdown will see activity in the economy recover 'quicker than it would if was a normal recession.'

Read more here: https://t.co/xVqko9FY6J pic.twitter.com/heyAfBtIMQ

12.09pm BST

It’s been a busy morning for telecoms news too.

Cable operator Virgin Media and mobile network O2 are merging, to create a £31bn “national champion” to challenge BT and Sky in the UK.

Related: Virgin Media and O2 owners confirm £31bn mega-merger in UK

Related: BT suspends dividend to free up 5G and broadband investment

11.50am BST

Here’s Anna Stewart of CNN on the Bank of England’s forecasts:

Bank of England says the economy will contract by 25% in the second quarter. Yes it’s bad.

However, it’s far better than OBR forecast of -35% a couple of weeks ago.

Plus take a look at the projected recovery... pic.twitter.com/PMlsLDAPXe

Sharp rise in unemployment - expected to hit 9% in Q2.

However, compare that to :
WH economist Kevin Hassett has warned of 20% unemployment in April

11.43am BST

London’s Evening Standard points out that the Covid-19 slump will be three times as severe as after the financial crisis of 2008.

Today’s ⁦@EveningStandard⁩ on the plans to stagger the rush hour and the latest Bank Of England forecasts pic.twitter.com/A811vwVaTL

11.35am BST

Covid-19 lockdowns has already pushed British Airway’s parent company into the red.

My colleague Jasper Jolly explains:

British Airways owner International Airlines Group made a £1.5bn loss in the first three months of the year, as chief executive Willie Walsh said it would take three years for passenger demand to recover to pre-pandemic levels.

IAG has halted 94% of its flights in response to travel restrictions during the coronavirus pandemic, causing it to bleed cash. Last week, British Airways set out plans to make up to 12,000 of its staff redundant because of the global collapse in air travel.

Related: British Airways owner reports £1.5bn loss due to coronavirus

11.11am BST

Despite the Bank of England’s gloomy prognosis for this year, stocks and the pound are a little higher this morning.

That’s partly because the BoE expects the economy to grow by 15% in 2021, after a 14% contraction this year [although arithmetically that still leaves the economy smaller]

11.03am BST

The Bank of England’s new governor, Andrew Bailey, has hinted that the BoE could expand its stimulus programme at its next meeting in June.

Bloomberg’s Jill Ward has the details:

Two of the BOE’s nine policy makers wanted to immediately increase bond purchases -- the main policy tool now that the key interest rate is near zero -- by 100 billion pounds ($124 billion) in a decision announced early Thursday. The rest agreed downside risks “might necessitate further monetary policy action.”

Bailey, who earlier pledged “total and unwavering commitment” to safeguard the economy during the coronavirus crisis, told reporters that the fact no action was taken this time doesn’t rule out a response soon.

"Bank of England Governor Andrew Bailey made clear that policy makers could expand monetary stimulus as soon as next month as the U.K. faces an economic slump that could be the worst in Europe"https://t.co/iQK3nKt2ef pic.twitter.com/XMtpY5HHsH

10.48am BST

Trade unions are urging the UK government not to make the economic downturn worse by turning off its furlough scheme too quickly.

The TUC says that today’s statistics showing that two-thirds of firms have tapped the Jobs Retention scheme shows it is vital.

Around half of the workforce are working from home, but varies drastically by industry.

A big majority of workers in the information and communication and professional sectors are working from home, whereas it's a small minority in other industries. pic.twitter.com/QDN3wcbIVk

Around a quarter (23%) of businesses have ceased or paused trading.

This rises to around 80% in the arts and accommodation and food sectors. pic.twitter.com/IsHQKI5wYF

10.37am BST

UK banks have approved an additional 8,550 government-backed business loans worth £1.4bn within the past week, but are still struggling to increase the pace of approvals amid rising demand.

The original coronavirus business interruption loan scheme (CBILS) has now lent around £5.5bn to 33,812 small and medium sized businesses since the programme was launched on 23 March.

“Bank staff have worked tirelessly over the past week to provide businesses with the finance they need, delivering another £1.4 billion of lending under the CBIL scheme, on top of over £2 billion in Bounce Back Loans targeted at smaller firms and sole traders.”

10.14am BST

Hat-tip to Ben Chu of the Independent, for showing just how grim the Bank of England’s forecasts are:

The Bank of of England's scenario for UK GDP for the full year of 2020 is...

-14%

That would be the worst year for the economy since 1706 according to the Bank's own historical dataset pic.twitter.com/aKflRovluH

We have estimates of quarterly UK GDP going back to 1920

The Bank's scenario has -25% in the second quarter of 2020.

That would be by far the worst seen: pic.twitter.com/7SH34zwqPW

10.08am BST

The Treasury Committee chairman Mel Stride has ordered Barclays to explain why customers are still having trouble accessing bounce back loans - which are meant to protect UK businesses from this year’s slump.

The 100% government-guaranteed bounce back loan scheme is meant to get cash to struggling businesses far more quickly than other programmes. Any impediments put those firms at risk, Stride said:

“Issues that hamper this are very frustrating to customers and may in some cases threaten business survival.

“I raised the problems that some people were having in accessing the Barclays online system with their CEO during our public committee hearing on Monday and was assured then that the system was able to cope well.

10.01am BST

Just in: nearly a quarter of UK firms have temporarily closed due to the pandemic, and two-thirds are furloughing some staff.

That’s according to the Office for National Statistics. It just reported that 23% of businesses who responded to its latest survey said they had “temporarily closed or paused trading” last month.

9.50am BST

The Bank of England has also shown how its scenario compare to City economists’ forecasts -- where the range is rather, er, broad:

Here's my fave chart from this morning's Bank of England Monetary Policy Report - it's the all-important "nobody knows" chart. pic.twitter.com/vsozkW5fC6

9.43am BST

The key message from the Bank of England today is that activity in the UK has fallen sharply, and is going to continue to plunge during this quarter.

Explaining why it thinks the UK will shrink 14% this year, it says:

Official data are sparse at this stage, but high‑frequency indicators suggest that consumer spending has fallen steeply since March. In large part, that reflects the impact of both enforced and voluntary social distancing, with some additional drag from lower incomes and confidence about the outlook. In those areas most affected, such as tourism and eating out, indicators including aircraft departures and data on the number of seated diners at restaurants suggest that spending has all but come to a halt.

The closure of businesses and widespread moves to working from home have reduced the number of journeys by car and public transport substantially. In addition, spending on many durables is likely to have been delayed. One area that has proved stronger is spending on food, as households substitute spending at supermarkets for eating out. Nevertheless, consumer spending in aggregate has fallen very significantly. In 2020 Q2, it is expected to be almost 30% lower than in 2019 Q4.

9.29am BST

There are also signs that UK house prices are starting to slide, amid the lockdown.

Halifax has reported that prices fell by 0.6% in April, on top of a 0.3% dip in March:

The #Halifax reported #UK #house #prices dipped 0.6% month-on-month in April after a revised fall of 0.3% in March. The annual rate of increase moderated to 2.7% in April from 3.0% in March and a peak of 4.1% in January (which had been the highest level since February 2018).

9.19am BST

The Covid-19 crisis has prompted Norway’s central bank to slash its interest rates to zero.

In a surprise move, the Norges Banks just lowered its key borrowing rate from 0.25% to 0.0%, a record low.

Norges Bank now predicts the mainland economy, which excludes oil and gas output, will contract by 5.2% in 2020, down from a March 13 forecast of 0.4% growth. It expects growth of 3.0% in 2021, up from 1.3% seen earlier.

BREAKING: #Norway's central bank delivers surprise rate cut to 0% in a unanimous decision. Don't envisage making further rate cuts but outlook and balance of risks imply very expansionary monetary policy stance. #Norges

#Norway's central bank lowers its benchmark rate to 0.00%! pic.twitter.com/e0pLjZzaSR

9.05am BST

My colleague Richard Partington writes that the Bank of England has sounded the alarm about the slump in the UK economy this year:

The Bank of England has warned the British economy could shrink by 25% this spring and unemployment more than double as the coronavirus pandemic brings the country to an effective standstill.

Leaving interest rates on hold as the economic crisis unfolds, the central bank said economic activity across the country had fallen sharply since the onset of the global health emergency and the lockdown measures used to contain its spread.

Related: UK unemployment to double and economy to shrink by 25%, warns Bank of England

9.01am BST

The Resolution Foundation think tank is concerned that the Bank of England predicts such a sharp jump in unemployment, and only a slow recovery in the labour market:

That 14 per cent hit to the economy is equivalent to around £300 billion, or £9,000 for every family in Britain, and shows why the Bank and Government are right to have protected households as much as possible with policies such as the Job Retention Scheme.

While the Bank’s scenario implies the UK economy will return towards its pre-pandemic growth path in 2021, it projects unemployment to remain above its pre-pandemic path until at least 2023 – after reaching a 25-year high of 9 per cent this year.

Stark unemployment forecast from the Bank of England this morning, and expects 25% contraction in the economy in the quarter to June. pic.twitter.com/pHQZPwXHCN

8.45am BST

Yael Selfin, chief economist at KPMG UK, fears the UK economy could shrink even more sharply than the Bank of England has forecast.

The Brexit cliff-edge at the end of the year, when the UK-EU withdrawal agreement ends, creates added uncertainty, she writes:

“Despite the stark numbers issued by the Bank of England today, additional pressure on the economy is likely. Some social distancing measures are likely to remain in place until we have a vaccine or an effective treatment for the virus, with people also remaining reluctant to socialise and spend. That means recovery is unlikely to start in earnest before sometime next year.

“Looking at the medium term, beyond the impact of reduced investment, other forces could to be in play dampening future productivity. Supply chains are likely to be reconfigured in light of this crisis, potentially increasing geographical diversification and reducing efficiency in order to increase resilience. ‘Just in time’ operations are also likely to be a thing of the past, further eroding productivity. On the other hand, we could see significant consolidation among SMEs, lifting productivity among the long tail of underperforming businesses.

The only good news today is that the Bank expects this economic bombshell to be short-lived, and for the economy to bounce back rapidly. However, the MPC itself concedes it is flying blind to a large extent, warning that a pandemic like this is “especially difficult to quantify”.

“While the Bank of England did not change its monetary policy stance at today’s meeting, it is surely only a matter of time before they decide to. The 7-2 split on whether to increase asset purchases indicates a continued dovish bias from certain voting members.

With the Bank hoovering up gilts equivalent to those issued since the additional £200 billion in quantitative easing was announced, it will run out of firepower to support government spending within in months. Therefore, expectations will be high for an increase in the purchase target at the next meeting in mid-June.

8.42am BST

The Covid-19 pandemic has forced the Bank of England to delay its much-anticipated bank climate stress tests.

The central bank has concluded that UK banks have enough to deal with, without calculating how they are positioned to handle the climate emergency (a key concern for former governor Mark Carney).

“Recognizing current pressures on firms, and in light of the responses to the December 2019 Discussion Paper on the Climate Biennial Exploratory Scenario, the PRC and FPC have agreed to postpone the launch of the exercise until at least mid-2021.

This delay reflects a desire to maintain the ambitious scope of the exercise, whilst giving firms enough time to invest sufficiently in their capabilities to allow them to deliver to a high standard.”

8.20am BST

The Bank’s new Financial Stability Report says UK households have entered the lockdown in a stronger position than before the 2008 financial crisis, thanks in part to substantial support including payment holidays on mortgages and credit cards.

However, the Bank warned that the sharp economic downturn would put pressure on personal finances and that it would have to keep a close eye on potential risks that may emerge once those payment holidays expire. That could include a fresh wave of customers attempting to refinance their debt.

8.12am BST

There is some good news.... the Bank of England is confident that Britain’s banks can ride out the Covid-19 pandemic, and handle a 14% plunge in GDP this year.

It says the banking sector is sufficiently capitalised to cover losses during the outbreak, especially as the BoE is providing more support to the sector.

Businesses and households will need to borrow to get through this period. We want banks and building societies to expand lending. We have tested the major UK banks. They are strong enough to keep lending, which will support the economy and limit losses to themselves.

We are offering more long-term funding to banks that increase their lending.

8.04am BST

Here’s a table outlining the Bank of England’s new Covid-19 scenario.

As you can see, it shows UK GDP shrinking 14% this year, business investment crumbling by 26%, household spending down 14%, and average earnings down 2%:

7.54am BST

The Bank of England has produced a 20-minute video, explaining today’s monetary policy decisions and its new scenario for how the UK economy will shrink this year:

7.48am BST

Reuters points out that the Bank of England is predicting the worst economic slump in centuries this year -- and a very strong recovery in 2021:

The Bank of England held off further stimulus measures but said it was ready to take fresh action to counter the coronavirus hammering which could cause the country’s biggest economic slump in over 300 years in 2020 before a bounceback in 2021.

The BoE said its Monetary Policy Committee kept Bank Rate at its all-time low of 0.1% and left its target for bond-buying, most of it British government debt, at £645bn.

Bank of England gives a big "V" to economists who think there'll be a lasting hit from the COVID-19 slump.

Illustrative scenario shows 14% drop in GDP in 2020, followed by a rise in 2021 of... 15%! pic.twitter.com/Wf5Z4Rp9Ds

7.45am BST

In another startling forecast, the Bank of England predicts that the global economy could contract by 20% this quarter.

It warns that the coronavirus pandemic, and the lockdown measures introduced to slow it, are hitting economic activity extremely hard:

The spread of the virus and the measures taken to protect public health have caused a substantial reduction in activity around the world. Survey indicators such as the output components of PMIs have fallen to record‑low levels since the start of the year, and suggest that many countries have experienced extremely sharp falls in activity.

Bank staff estimate that UK‑weighted world GDP declined by around 4% in Q1 and could fall by over 20% in Q2. World trade has also declined significantly, and is expected to contract by around twice as much as global GDP in 2020. While many major countries have introduced wage subsidy schemes to reduce job losses, unemployment has increased markedly around the world and many more employees are working less than usual.

7.34am BST

Despite the government’s efforts, the Bank of England predicts that unemployment will rise sharply in the next few months.

Its new Covid-19 scenario suggests the UK jobless rate could soon spike to 9% - up from 4% at present - even though the government is encouraging firms to furlough staff.

As activity has fallen, the number of people in work has dropped sharply. It is likely that the Government’s Coronavirus Job Retention Scheme (CJRS) has materially reduced the number of redundancies. Early data suggest that applications for furlough have been received from 800,000 companies covering over six million jobs.

The number of people furloughed might be a little lower, though, as some could have more than one furloughed job. While the CJRS has significantly limited job losses, the flow of new Universal Credit benefit claims and early indicators of redundancies suggest that unemployment has risen sharply over the past couple of months. The unemployment rate is expected to rise to 9% in Q2.

7.24am BST

The Bank of England has forecast that the UK economy could shrink by 14% this year.

It has drawn up a new scenario, showing how the Covid-19 pandemic will hurt growth.

The spread of Covid-19 and the measures to contain it are having a significant impact on the United Kingdom and many countries around the world. Activity has fallen sharply since the beginning of the year and unemployment has risen markedly.

The illustrative scenario incorporates a very sharp fall in UK GDP in 2020 H1 and a substantial increase in unemployment in addition to those workers who are furloughed currently. Given the assumed path for the relaxation of social distancing measures, the fall in GDP should be temporary and activity should pick up relatively rapidly.

Nonetheless, because a degree of precautionary behaviour by households and businesses is assumed to persist, the economy takes some time to recover towards its previous path. CPI inflation is expected to fall further below the 2% target during the second half of this year, largely reflecting the weakness of demand.

7.11am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Some early breaking news: The Bank of England has voted to leave UK interest rates at their record lows, at its policy meeting today.

The timeliest indicators of UK demand have generally stabilised at very low levels in recent weeks, after unprecedented falls during late March and early April. Payments data point to a reduction in the level of household consumption of around 30%.

Consumer confidence has declined markedly and housing market activity has practically ceased. According to the Bank’s Decision Maker Panel, companies’ sales are expected to be around 45% lower than normal in 2020 Q2 and business investment 50% lower.

We celebrate VE Day with the need to forge new trading relationships and with the grotesque economic burden of the coronavirus

• See all our coronavirus coverage

In making his landmark post-Brexit speech in February under Sir James Thornhill’s baroque painted ceiling in the Royal Hospital, Greenwich, Boris Johnson believed he had found the perfect setting to paint his own picture of Britain charting a new course as a free-trading, independent, open and liberal nation.

Like the painting above him, eulogising the triumph of William and Mary over the popish and tyrannical French, Johnson’s speech was an optimistic and patriotic piece of work. It offered a distinctive vision of British prosperity and diplomatic superiority.

Oil price rises and shares end week on a high despite growing economic damage from coronavirus pandemic

Global markets rose on Friday despite mounting economic damage from the coronavirus pandemic, as tensions eased between the White House and Beijing.

Share prices on Wall Street and in Europe ended the week on a high amid rising hopes that lockdown measures could be lifted soon to reboot growth and that a full-blown global trade war could be averted.

Related: US Nasdaq index recovers all of 2020's losses triggered by Covid-19