£ 30 b UK’s Sunak unveils mega survival plan
FIFTH-BIGGEST ECONOMY SUFFERS WORST RECESSION IN THREE CENTURIES
Rishi Sunak set out a £30-billion (Dh137.97 billion) blueprint to save jobs and inject confidence into the UK’s coronavirus-battered economy.
In a statement to Parliament, the Chancellor of the Exchequer announced tax cuts on home-buying and dining out, and a new bonus programme for employers who don’t fire their staff.
“We face profound economic challenges,” the Chancellor of the Exchequer told the House of Commons yesterday. “In just two months our economy contracted by 25 per cent — the same amount it grew in the previous eighteen years.”
With a budget due in the fall, Sunak signalled he will take further steps as he promised to do everything he can to save jobs and give families “hope” in the months ahead. The chancellor’s plan included:
Sunak faces a gargantuan task in pulling the world’s fifth-biggest economy out of what may be its worst recession in three centuries. Unemployment is expected to spike upwards as he unwinds unprecedented government programmes that are funding the wages of more than 12 million workers. So far, the state has already provided more than £160 billion of support for the economy.
Risks ahead
The risk for Sunak is that his gamble on a package of measures to boost business and consumer spending does not work. If prospective homebuyers do not feel confident in their jobs, a cut to stamp duty may not be enough to persuade them to enter the housing market.
If the public are worried about social distancing in restaurants, the promise of a cheaper meal may not get them to book a table. And employers may decide that £1,000 per worker is not enough to offset the costs they face. And if the economy remains stuck as a second wave of the pandemic hits Britain, the damage will be entrenched.
While “not a huge intervention” by recent standards, Sunak’s plan should “help cushion some of the turbulence in the jobs market over coming months,” said James Smith, developed markets economist at ING. “But more importantly, no amount of fiscal support can mask the fact that the UK recovery hinges almost solely on avoiding a return to repeated, widespread lockdowns.”
The chancellor said he will not be held back by political ideology, even after calls from some within his party to avoid piling up the nation’s debts.
Bond markets have shrugged off Sunak’s latest largesse, which doesn’t stand out in the current climate of high spending. Yields on 10-year bonds fell 1 basis points to 0.17 per cent. Investors are more focused on the Bank of England’s plans for asset purchases and the latest issuance plans from the Debt Management Office. Sterling erased gains to trade down 0.1 per cent at $1.2533.
Mike Bell, global market strategist at JPMorgan Chase & Co. asset management, said the main risk is unwinding the furlough programme before recovery has taken hold, which could result in millions of job losses.