Andrew Bailey has today revealed the catastrophic state of the UK economy following the coronavirus pandemic. He has said the early stages of the outbreak of the virus had a serious impact on the economy.
Talking to the new Sky News podcast, The World Tomorrow, the governor also warned that many viable British companies will not survive the COVID-19 recession, his clearest signal yet that the economy will be left permanently scarred by the crisis.
The governor added the Government would have struggled to fund itself had the bank not intervened in the “market meltdown”.
Mr Bailey has also warned the dislocation in markets in March was even more serious.
The bank intervened with £200billion in QE at the time, and has since pumped £100billion into the economy to continue those efforts.
£200billion is the single biggest cash injection in the bank’s history.
The bank’s benchmark rate currently sits at 0.1 percent, but there has been speculation by economists that this could be brought even lower.
Speaking to Sky News, he said: “We basically had a pretty near meltdown of some of the core financial markets.”
“We had a lot of volatility in core markets: the core exchange rate, core government bond markets.
“We were seeing things that were pretty unprecedented, certainly in recent times. And we were facing serious disorder.”
Mr Bailey added that had the BoE not intervened, the government would have struggled to fund itself. This is something that has not happened in living memory.
The structure of the UK economy is changing due to the coronavirus crisis, he said, and the UK needs to brace itself for the end of the jobs run that saw unemployment drop below 4 percent.
The Government’s job retention scheme has so far been somewhat successful in supporting the jobs market, but, Mr Bailey warned, many indebted companies will struggle to finance themselves.
The bank’s current scenario for post-COVID recovery assumes unemployment will rise sharply, before seeing a gradual recovery.
If structural changes mean jobs don’t return, the long-term outlook could be much worse.
He said another structural adjustment could come from the aftermath of Brexit, as that may change the way the UK trades.