MORE than two million people could lose their jobs and the economy may fall off a cliff edge because of the coronavirus lockdown, the UK's fiscal watchdog has said - as the Chancellor warned of "tough times" to come.

The Office for Budget Responsibility (OBR) said unemployment could hit 3.4 million - up from 1.3m - leaving around one in 10 of the working population without a job, while the economy may shrink by 35 per cent between April and June.

Rishi Sunak said not every business or household could be protected, but that a "bounceback in growth" was expected when the crisis eases.

It came as the UK death toll for patients in hospital who tested positive for coronavirus rose above 12,000, while ministers faced pressure from Labour to publish their lockdown exit strategy this week. In other developments:

- A survey by the British Chambers of Commerce suggested around one in three British businesses has furloughed between 75 per cent and 100 per cent of its workforce due to the coronavirus crisis;

- The International Monetary Fund projected that the global economy would suffer its worst year since the Great Depression in the 1930s, shrinking by an estimated three per cent;

In its first estimate of the economic toll taken by the crisis, the OBR said public sector net borrowing is expected to increase by £218 billion this year, compared with March forecasts, hitting £273 billion, or 14 per cent of GDP.

"That would be the largest single-year deficit since the Second World War," the independent forecaster said.

"The sharp rise in borrowing this year largely reflects the impact of economic disruption on receipts (with smaller effects from policy measures like the business rates holidays) and policy measures that add to public spending (with smaller effects from higher unemployment)."

It based the outlook on a scenario where the lockdown lasts three months followed by a partial lifting for three months, but said, in this case, that there would be a sharp bounceback in the economy, with gross domestic product likely to jump 25 per cent in the third quarter and a further 20 per cent in the final three months of 2020.

Mr Sunak told the daily Downing Street press conference: "These are tough times and there will be more to come. As I have said before, we cannot protect every business and every household.

"But we came into this crisis with a fundamentally sound economy, powered by the hard work and ingenuity of the British people and British businesses.

"So while those economic impacts are significant, the OBR also expects them to be temporary, with a bounceback in growth."