The UK economy could fall off a cliff edge due to the Covid-19 lockdown, potentially shrinking 35% between April and June while unemployment surges by more than two million, according to Britain's fiscal watchdog.

In its first estimate of the economic toll taken by the coronavirus crisis, the Office for Budget Responsibility (OBR) said unemployment could hit 3.4 million, leaving around one in 10 of the working population without a job.

Public sector net borrowing could reach £273 billion in 2020-21, or 14% of gross domestic product (GDP), marking the biggest deficit since the Second World War.

READ MORE: UK economy set to contract by more than a third

It has based the grim outlook on a scenario where the lockdown lasts three months followed by a partial lifting for three months.

But the independent forecaster said, in this case, there will be a sharp bounce back in the economy, with gross domestic product likely to jump 25% in the third quarter and a further 20% in the final three months of 2020.

The OBR's report, which it stressed is a scenario-based analysis and not a forecast, lays bare the scale of the challenge to Chancellor Rishi Sunak and the impact on the public purse.

Public sector net debt is expected to rise sharply, surpassing 100% of GDP at one stage during the year, but ending 2020 at 95% compared with previous estimates of 77%.

The OBR said: "The net effect of the coronavirus impact and the policy response is likely to be a sharp (but largely temporary) increase in government borrowing that will leave public sector net debt permanently higher as a share of GDP.

"However, the longer the period of economic disruption lasts, the more likely it is that the economy's future potential output will be 'scarred' (thanks to business failures, cancelled investments and the unemployed becoming disconnected from the labour market)."

"If that happens, the budget deficit would reverse less of its temporary rise as economic activity recovers, leaving the Government to confront a larger structural deficit and not just higher debt."

Chancellor Rishi Sunak told BBC News: "It's clear this will have a very significant impact on our economy (in) common with economies around the world and it's important that we're honest about that."

He added: "The report makes clear that the actions we've taken, unprecedented actions will help to mitigate the impact of the virus on our economy."

Executives at Premier Inn owner Whitbread have agreed to cut their pay by 30% as part of measures to mitigate the impact of coronavirus.

Chief executive officer Alison Brittain and executive directors Nicholas Cadbury and Louise Smalley have all agreed to the salary reduction and will not take bonuses for the 2019-20 financial year.

READ MORE: 1,000 jobs lost at Wizz Air 

The company said all other staff will receive full wages, with staff furloughed under the Government's coronavirus job retention scheme seeing their wages topped up by the firm.

Following the closure of around 800 hotels across the UK, it has made 37 hotels exclusively available to NHS staff during the pandemic. Shares in the company were down 4% at 2,846p.

AB InBev, the world's largest brewer, has halved its dividend in a move it said will save the firm around 1 billion euro (£870 million).

The company, which makes Corona and Budweiser, said it has also postponed its annual general meeting in the wake of the pandemic.

READ MORE: Scott Wright: What will virus crisis mean for Scotland's famous food and drink exports?

The brewing firm, which counts the United States and Brazil as its largest markets, withdrew its forecasts for trading in 2020 three weeks ago.

William Ryder, equity analyst at Hargreaves Lansdown, said: "The biggest worry for AB InBev is the balance sheet.

"While recent asset sales will have chipped away at the debt, we suspect current conditions are preventing the group from making the progress it would like."

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