New Chancellor Rishi Sunak’s March 11 budget plans ‘are thrown into chaos’ by coronavirus

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New Chancellor Rishi Sunak’s March 11 budget plans ‘are thrown into chaos’ by coronavirus – as global stock markets brace for another wipeout week

  • Global crisis last week spooked investors and sent stock markets into free-fall 
  • Traders are braced for another bruising week on world’s blue-chip exchanges 
  • The Office for Budget Responsibility is expected to revise its economic forecast 
  • This will leave Mr Sunak with less fiscal wiggle room as funds will be kept back

By Jack Elsom For Mailonline

Published: | Updated:

Chancellor Rishi Sunak has been warned his best-laid budget plans may be scuppered by the economic fallout from coronavirus. 

The global health crisis last week spooked investors and pushed stock markets into free-fall, with London’s FTSE suffering its biggest slump since the 2008 crash. 

Traders are braced for another bruising week on the world’s blue-chip exchanges, with Tokyo and Australia reporting early losses on Monday.

Such financial downturns are expected to force the Office for Budget Responsibility (OBR) to offer a more gloomy economic forecast and leave Mr Sunak with less fiscal wiggle room.

Uncertainty created by the virus will hamstring his ability to turn on the spending taps and pay for the Prime Minister’s ‘levelling up’ agenda in the North, as funds will have to be kept back as a buffer for any infection-induced shocks.

The cost of locking down London in a worst-case scenario could spiral to £10billion, according to one consultancy firm. 

Chancellor Rishi Sunak has been warned his best-laid budget plans will unravel because of the economic pounding dealt by coronavirus

The global health crisis last week spooked investors and pushed stock markets into free-fall, with London's FTSE suffering its biggest slump since the 2008 crash

The global health crisis last week spooked investors and pushed stock markets into free-fall, with London’s FTSE suffering its biggest slump since the 2008 crash

Mr Sunak was already racing to thrash out his spending plans after being parachuted into the Treasury following the resignation of his predecessor Sajid Javid.

And he may have to water down these proposals if the OBR revises its forecast, which a source told the Times it is poised to do. 

This is also the view of former Treasury minister David Gauke, who predicted the economic watchdog would re-calibrate its forecast. 

‘Given the uncertainties, the OBR is likely to qualify its economic forecasts,’ he wrote in the Observer yesterday. 

‘This does not make the task of the new chancellor, Rishi Sunak, any easier.’

The former Tory cabinet minister added: ‘In these turbulent circumstances, the chancellor would be entitled to take a cautious approach in his first budget.’ 

A snapshot of the havoc coronavirus could wreak on the City was seen last week when US oil titan Chevron sent home 300 staff from its Canary Wharf offices after an employee fell ill following a trip to infection-riddled Italy.  

Boris Johnson will today chair a meeting of COBRA to coordinate a response to the crisis, as Britain’s infection tally jumped to 36.

Boris Johnson will today chair a meeting of COBRA to coordinate a response to the crisis, as Britain's infection tally jumped to 36 (pictured yesterday at the Public Health England command centre)

Boris Johnson will today chair a meeting of COBRA to coordinate a response to the crisis, as Britain’s infection tally jumped to 36 (pictured yesterday at the Public Health England command centre)

The worldwide death toll hit 3,000 last night, and markets appear to still be gripped by coronavirus fears. 

Tokyo stocks opened lower on Monday after lingering worries over the spread of the virus, with the yen firming against the dollar.

The benchmark Nikkei 225 index slipped 1.09 percent or 230.80 points to 20,912.16 in early trade, while the broader Topix index was down 1.26 percent or 18.99 points at 1,491.88.

Yukino Yamada, senior strategist at Daiwa Securities, said investors are ‘watching the number of patients short-term, while governments of relevant countries are readying measures’ including economic stimulus. 

The Australian dollar hit near 11-year lows on Monday after a dire reading on Chinese manufacturing and talk of rate cuts in the United States stoked speculation of an imminent policy easing at home.

The Aussie was down at $0.6478, having dived as deep as $0.6435 on Friday for a loss on the week of 1.9 per cent. There is still little in the way of chart support until a $0.6280 low from early 2009.

The New Zealand dollar sank to $0.6203, having shed 1.6 per cent last week to touch lows last seen in 2009.