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Britain needs an urgent exit plan for Covid-19 lockdown, warns think-tank

The Adam Smith Institute has accused the Office for Budget Responsibility of underestimating the long-term economic hit from the lockdown.

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Countless businesses have been shut down amid the outbreak (Ben Birchall/PA)

Countless businesses have been shut down amid the outbreak (Ben Birchall/PA)

Countless businesses have been shut down amid the outbreak (Ben Birchall/PA)

The UK urgently needs an exit plan for the coronavirus lockdown, a think-tank has warned as it claimed Britain’s fiscal forecaster has “downplayed” the crippling long-lasting effects on the economy.

The Adam Smith Institute accused the fiscal watchdog, the Office for Budget Responsibility (OBR), of underestimating the long-term hit from the lockdown and closure of a third of the economy.

It said the OBR’s scenario analysis released earlier this week did not factor in the risk of systemic economic decline if Britain’s lockdown is sustained.

The OBR predicted the economy could shrink by 35% and unemployment rise by 2 million if the lockdown continues for three months followed by a partial lifting for three months – but its analysis did not assume any lasting economic consequences.

The institute warned the UK was falling behind other countries that already have reopening strategies and timelines in place, such as Germany, Italy, Norway, Austria, Spain, Denmark and the Czech Republic.

It said this was holding UK businesses back from being able to plan for recovery once lockdown restrictions are eased.

Matthew Lesh, head of research at the Adam Smith Institute and co-author of the report, said: “The limbo must come to an end.

“The closure of one-third of the economy has been necessary to slow the spread and protect the health service – but it cannot last forever.

“We need a route out of this mess: a strategy to protect from this virus while allowing life to progressively return to normal.

“This will mean testing and tracing capabilities ramped up, maintaining physical distance in shared spaces, but allowing as many businesses as possible, as quickly as possible, to reopen their operations.”

Britain should consider prepping for a phased reopening and scaling back of state support for the economy, according to the free market think-tank.

It stressed the lockdown should only be lifted once clinicians advise the outbreak is under control, but added that an “open and transparent” exit plan would help ensure public support for the social distancing measures.

The call comes as official figures on Thursday revealed a quarter of British businesses have temporarily halted trading in response to the outbreak.

The Office for National Statistics (ONS) data also showed that firms which have continued to trade furloughed an average of 21% of their workforce in the two weeks to April 5.

New Labour leader Sir Keir Starmer has also made a similar call for the Government to plan for a phased reopening of the economy.

The Adam Smith Institute said a phased plan would allow companies to assess the feasibility of their operations and calculate the worth of borrowing, but said the longer lockdown continues with no end in sight, the “less feasible an option this is”.

PA