Britain’s economic growth under enormous strain due to COVID-19

 Britain’s finance minister Rishi Sunak on Sunday warned that the British economy was under “enormous strain” because of the coronavirus, ahead of a government spending review next week

But he ruled out a return to austerity measures.

Economic forecasts to be released alongside his Wednesday spending review would show “the enormous strain and stress that our economy is experiencing”, Sunak told Sky News.

The findings of independent forecasters the Office for Budget Responsibility -- as well as the 750,000 job losses from coronavirus -- would have to be taken “in the round as we consider the best way to fight the virus”, he said.

Despite the profound impact of the coronavirus on Sunak’s spending review, he rejected a possible return to austerity measures on the economy.

Government spending would continue to increase on last year’s day-to-day public spending, he said. “There’s absolutely no way in which anyone can say that’s austerity.”

However, he refused to rule out a widely expected public-sector pay freeze.

It was fair to “think about what is happening with wages, with jobs, with hours, across the economy when we think about what the right thing to do in the public sector is”, he said.

Britain has suffered more than any other country in Europe from the coronavirus, recording more than 54,000 deaths from 1.4 million cases.

In November Prime Minister Boris Johnson’s government imposed a four-week lockdown to stop the spread of the disease. That is due to be partially lifted on December 2, giving some relief to businesses.

Sunak said the government was “looking at ways to see how families could spend time with each other over Christmas” but refused to pre-empt an announcement on the UK’s winter virus strategy by Prime Minister Boris Johnson due Monday.

The government has said the England-wide lockdown will be replaced by the tier system that had previously operated across the country

On Saturday, ahead of the spending review, Sunak’s department unveiled a £3 billion ($3.9 billion, EUR3.4 billion)to support the National Health Service (NHS) in tackling the impact of coronavirus.

As part of the package, £1 billion will be spent on addressing backlogs in the health service -- paying for up to one million extra checks, scans and additional operations for those who have had their treatment delayed since the start of the pandemic.

The UK has  signed an interim trade deal with Canada, giving it more time to negotiate future trading rules as the British government prepares the country for business life outside the European Union.

The stopgap agreement allows trade between the two countries to continue under the same terms as Canada’s existing treaty with the EU while negotiators begin work on a new bilateral deal between the UK and Canada, Prime Minister Boris Johnson said in a statement. Canada is the UK’s eighth-biggest non-EU trading partner.

While Britain formally withdrew from the EU in January, it continues to trade with other countries under the bloc’s umbrella during a transition period scheduled to end Dec. 31. Without a series of new bilateral agreements, trade with countries around the world may be hampered by barriers such as tariffs and increased paperwork.

“Our negotiators have been working flat-out to secure trade deals for the UK, and from as early next year we have agreed to start work on a new, bespoke trade deal with Canada that will go even further in meeting the needs of our economy,” Johnson said.

Johnson’s government says the ability to strike free trade agreements with countries around the world is one of the main benefits of leaving the EU. It is banking on increased trade with countries such as the United States and India to offset any negative impact from severing ties with the EU, which accounted for 47% of Britain’s overall trade last year.

Britain ships goods ranging from electric cars to sparkling wine to Canada, and imports products such as salmon and maple syrup from the Commonwealth country that also recognizes Queen Elizabeth II as head of state.

The deal with Canada locks in existing trading rules that cover 20 billion pounds ($27 billion) of trade between the two countries, or about 1.5% of the UK’s total trade in goods and services last year.

The UK has now secured post-Brexit trade deals with 53 countries accounting for 164 billion pounds ($218 billion) of bilateral trade, the government said. That’s less than 12% of the 1.4 trillion pounds (about $1.9 trillion) of trade Britain recorded last year.

Britain has yet to strike a deal with the European Union on post-Brexit trading rules. Both sides have warned there could be a no-deal end to the transition period next month unless the two sides can soon bridge their remaining differences on fishing, state aid for industry and the resolution of future disputes.

Without an agreement on future relations between Britain and the EU, trade between the two entities would be carried out under World Trade Organization terms.

Johnson’s government says this type of relationship wouldn’t hamper trade, but opponents warn that tariffs would increase prices for British consumers and border checks would lead to shortages of some goods.