UK offers extra $6.2 billion help for companies hit by lockdowns
A masked pedestrian walks past the Bank of England building in London. File/Reuters
Finance Minister Rishi Sunak said retail, hospitality and leisure companies will be able to claim one-off grants worth up to 9,000 pounds to get them through the coming months - adding to hundreds of billions of pounds of existing support.
Prime Minister Boris Johnson announced the lockdown late on Monday saying a highly contagious new coronavirus variant first identified in Britain was spreading so fast it risked overwhelming the National Health Service (NHS) within 21 days.
“This will help businesses to get through the months ahead - and crucially it will help sustain jobs, so workers can be ready to return when they are able to reopen,” Sunak said.
Under the new lockdown, people are instructed to work from home unless it is impossible for them to do so. All hospitality venues must remain closed as well as non-essential shops. Organised sports, both indoors and outdoors, are cancelled except for elite competitions.
In addition to the UK-wide grants, worth around 4 billion pounds, the government will provide 594 million pounds of funding to the administrations of Scotland, Wales and Northern Ireland.
Sunak said in November that measures taken to that point to help the economy through the pandemic would cost about 280 billion pounds this financial year.
“This new grant package is welcome, and will go some way to reassuring the worst affected businesses,” said Roger Barker, director of policy at the Institute of Directors business group.
Britain suffered the most severe contraction of any Group of Seven economy in the second quarter of 2020, when the country was hit by its first lockdown, with output down by almost 20%.
The Organisation for Economic Development and Coordination has estimated that Britain’s recovery by the end of this year will be the slowest of all its member countries except for Argentina.
Sunak said: “The new strain of the virus presents us all with a huge challenge - and whilst the vaccine is being rolled out, we have needed to tighten restrictions further.
“Throughout the pandemic we’ve taken swift action to protect lives and livelihoods and today we’re announcing a further cash injection to support businesses and jobs until the Spring.”
“This will help businesses to get through the months ahead - and crucially it will help sustain jobs, so workers can be ready to return when they are able to reopen,” Sunak said.
JP Morgan analyst Allan Monks said: “The furlough scheme is already set to run until the end of April, and a further extension seems likely as the date of the recovery has been pushed back further. While the ever-increasing size of the fiscal deficit will put some pressure on the BoE to match this with larger QE purchases - for example a 50 billion pounds increment would seem in the right ballpark on this metric - in November the Bank of England (BoE) indicated that it had already done more than it needed to (+£150 billion) on the grounds of risk management”.
“As those risks are now playing out, it’s not clear it will want to do more straight away: the Bank of England has already laid out a program of purchases which is expected to see it through to the end of this year, and has indicated that it is only likely to up its weekly purchase pace if there are renewed signs of disruption in markets,” Monks said.
Meanwhile, British shares gained on Tuesday, led by a jump in retail stocks following record grocery sales in December, while fresh stimulus measures overshadowed risks arising from a new national lockdown imposed to curb the spread of a new coronavirus variant.
Prime Minister Boris Johnson said on Monday the more contagious variant was spreading at great speed and immediate action was needed to slow it down.
The benchmark FTSE 100 index gained 0.2%, with general retailers and energy stocks gaining between 2% and 3%. BP and Royal Dutch Shell were the biggest boosts to the index.
Britain on Tuesday announced a new support package, under which retail, hospitality and leisure companies will be able to claim new one-off grants worth up to 9,000 pounds.
