Coronavirus: UK to ramp up support as pandemic hammers economy

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Hind Al Soulia - Riyadh - Britain’s finance minister is set to unveil new measures to help businesses hit by the coronavirus pandemic after the government told people to avoid social gatherings and work from home where possible, putting some companies on the verge of collapse.

Chancellor Rishi Sunak, who last week announced support for business alongside emergency moves by the Bank of England, is expected to announce the new steps at a daily government news conference, a finance ministry source said.

In his first budget statement to parliament last week, Mr Sunak announced 30 billion pounds (Dh134 billion) of measures to support public healthcare, affected businesses and provide broader economic stimulus in the face of the coronavirus.

Coronavirus

Adam Marshall, the director general of the British Chambers of Commerce, said the government needed to take further steps.

"Government has got to do more on the upfront costs facing businesses. Banks have got to do more to get support to the front line,” he told the BBC.

“I think the UK has to do more to coordinate a global economic response," he said, adding that the suspension of tax bills would be the most useful immediate step.

Billionaire British businessman John Caudwell on Tuesday said the outbreak could cost the economy "hundreds of billions of pounds, maybe trillions".

He urged the finance minister to offer a bailout to businesses worth hundreds of billions of pounds.

"Without help millions of people will be out of work," he told BBC Radio 4's Today programme.

British companies have already been hit hard by the latest crisis.

The world's biggest catering firm Compass Group warned on Tuesday that its half-yearly operating profit would be lower than expected after European and North American governments and businesses sought to contain the spread of the virus.

New Bank of England Governor Andrew Bailey promised more "prompt action" by the central bank on Monday, less than a week after an emergency rate cut by the BoE as the scale of the coronavirus hit to the economy became clearer.

Chancellor Rishi Sunak's earlier budget was roundly criticised by business leaders. Reuters

Investors are watching out for another rate cut, possibly before the BoE's next scheduled announcement on March 26, even though its room for manoeuvre has been reduced by last week's action when its benchmark lending rate was cut to 0.25 per cent.

The central bank is also expected to expand its £435 billion government bond buying programme.

"We expect more easing on the monetary and fiscal fronts," JP Morgan economist Allan Monks said. "These actions will cushion the economic hit rather than meaningfully offset it."

Sterling dropped to its lowest level against the US dollar since early September on Tuesday.

The pound has been in retreat as fears about the economic impact of the pandemic have roiled global markets and sent investors fleeing to assets seen as relative safe havens, including the dollar.

Analysts say sterling is also vulnerable given Britain's high current account deficit.

The pound fell as much as 0.6 per cent to $1.2192 on Tuesday. Against the euro it edged up 0.2 per cent to 91.06 pence per euro.

French President Emmanuel Macron said on Monday that his government would guarantee 300 billion euros worth of loans, and promised that no French company of any size would be allowed to collapse.

Britain has 1.8 trillion pounds of public sector debt, equivalent to about 80 per cent of GDP, a figure that is lower than many other advanced economies. But debt can rise sharply during downturns. Before the 2008 financial crisis, the debt burden stood at 34 per cent.

The increase in debt largely reflected the long-lasting economic slowdown and reduced tax revenue.

Britain spent about £137 billion to provide support to banks during the crisis, but most of this cost was recouped and the longer-term net direct cost was nearer £27 billion. There were also £1 trillion of loan guarantees.

Updated: March 17, 2020 03:34 PM

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