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UK's Rishi Sunak plans Covid support for economy lasting into summer

February 23, 2021
finance & economy

Key aid programmes due to end as early as next month but chancellor is looking to extend assistance

The UK’s finance minister, Rishi Sunak, is set to spend billions of pounds more in state support for the economy over the next four months, as an extended lockdown threatens businesses’ survival.

The chancellor of the exchequer will set out the details in his March 3 budget after Prime Minister Boris Johnson outlined a timeline for reopening the UK economy, which keeps some companies closed until at least June 21.

Mr Johnson’s four-step road map for lifting the lockdown will influence how fast Treasury subsidies are withdrawn, sources say.

Key aid programmes are due to end as early as next month but Mr Sunak will extend assistance so that companies and people do not face a cliff-edge while restrictions are still in place, the sources said.

“People may be concerned about what these changes mean for the various support packages for livelihoods, for people and for the economy,” Mr Johnson told Parliament on Monday.

“We will not pull the rug out. For the duration of the pandemic, the government will continue to do whatever it takes to protect jobs and livelihoods across the UK.”

Mr Sunak faces a daunting task to put the economy on a path to recovery after suffering its deepest slump in three centuries last year.

The budget deficit is already setting peacetime records after he committed to spending £300 billion ($422bn) to help the health service and businesses cope with the crisis, a sum that is set to increase next week.

Continuation of support will broadly track the exit strategy, while taking into account the fact that business will not immediately return to normal levels even when shops and pubs are allowed to reopen, the sources said.

That suggests assistance will last beyond the date of June 21 set by Mr Johnson to reopen the last sectors of the economy.

The premier’s road map means businesses such as nightclubs will be shut until at least June 21, while theatres, concert halls and sporting venues will have limits on the crowds they can admit until then, making many of them unprofitable.

Pubs and restaurants will not be able to reopen until at least April 12, and then only for outdoor service.

By the time indoor service is allowed in mid-May, many businesses will have been closed for nearly 200 days “with just a couple of weeks of heavily restricted trading in December', said UKHospitality chief executive Kate Nicholls.

“A major package of financial support is imperative,” Ms Nicholls said. “This delay in reopening will make the job of survival all the more difficult for businesses only just clinging on to existence.”

Government support policies due to expire by the end of April include Mr Sunak’s programme that pays furloughed workers up to 80 per cent of their wages, a business rates holiday and lower sales tax for hospitality and tourism.

He faces calls to extend all of them, from business groups and politicians, including two predecessors in his Conservative party.

“The chancellor must deliver on the prime minister’s 'whatever it takes’ pledge,” said Mike Cherry, Federation of Small Businesses national chairman.

“On one side of the coin we have continued restrictions; on the other, we need corresponding business support.”

Conservative Party members also called for the economy to be reopened more quickly, especially when the 32 million people most vulnerable to Covid-19 are due to have been vaccinated by mid-April.

thenationalnews