Matthew Lynn

Britain’s GDP figures are dreadful but Sunak must still hold his nerve

Rishi Sunak (Getty images)

A five hundred quid shopping voucher for everyone. Five per cent off VAT across the board. Maybe suspending income tax for a couple of months, or getting rid of corporation tax until the end of the year. As today’s disappointing GDP numbers landed on his desk, the Chancellor Rishi Sunak must have been tempted to reach for the Treasury folder marked ‘extreme emergency measures’. The V-shaped recovery he was no doubt hoping to engineer is increasingly looking more like an L – a big drop followed by a flat line.

Another round of government stimulus right now would be tempting. But it would also be a mistake: the Treasury has already borrowed and spent enough. All it can do now is to steadily re-open the economy and let supply catch up with demand. And the most important thing Sunak can do is hold his nerve.

The very worst response would be to panicked into yet more emergency stimulus

The City was hoping for a stronger bounce back in the GDP data.

Written by
Matthew Lynn

Matthew Lynn is a financial columnist and author of ‘Bust: Greece, The Euro and The Sovereign Debt Crisis’ and ‘The Long Depression: The Slump of 2008 to 2031’

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