Britain’s chancellor of the exchequer, Rishi Sunak, is this week expected to announce plans to extend business loan programs amid warnings that the novel coronavirus will cause “a very challenging winter”.
The extension of the programs, which have already provided businesses with 53 billion pounds’ ($68 billion) worth of support, show the level of concern about the possibility of significant numbers of businesses collapsing, and jobs being lost.
On Monday, England’s chief medical officer, Chris Whitty, and the government’s chief scientific advisor, Patrick Vallance, gave a bleak outlook on the United Kingdom’s efforts to control the pandemic.
“The trend in the UK is heading in the wrong direction,” said Whitty. “We are at a critical point in the pandemic. We are looking at the data to see how to manage the spread of the virus ahead of a very challenging winter period.”
The furlough program, which has seen the government subsidize the wages of many employees, will be wound up at the end of October, and Sunak said he will be “creative” in finding alternative ways to support jobs through the coming months.
The Financial Times says the Treasury will extend the application deadline for the government’s business loan programs, three of which were scheduled to end applications at the end of this month, although the Treasury has yet to comment on this.
Writing in the Evening Standard newspaper, HSBC’s senior economic advisor, Stephen King, said Sunak “needs to be more targeted with his generosity” as he pondered his plan.
“We know a bit more now about the impact of COVID-19 on the economy. And we need the economy to adjust in the right direction,” he said.
More part-time work or job-sharing schemes could see a drop in full-time work, King said, but at least help the government avoid a “cliff－edge” drop in employment.
“It would also reintroduce some element of market discipline,” he continued.
“In a normal year, many thousands of businesses fall by the wayside. COVID-19 cannot be used as an excuse to preserve in aspic the inefficient, the unproductive and the obsolete.”
Sunak will also have to deliver a budget in November, but former chancellor Philip Hammond told the Daily Telegraph he did not expect it to contain drastic actions.
“I think it will be quite difficult for him to make the big decisions in November and I think he has realized that, which is why he is signalling he will hold a mini-budget,” he says.
The new year, Hammond said, would give a clearer picture of the likelihood of any return to normality.
“Rishi has potentially got a double shock to address next year. My guess is that he will do some cosmetic things in November and leave the big things until the spring,” Hammond added.