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COVID-19 economy graph

Analysing the UK Government’s economic response to the COVID-19 pandemic

There is no doubting the fact that the COVID-19 pandemic has already begun to cause significant disruptions to the worldwide economy.

Given the fact that the majority of businesses in the UK will see their operations affected, it is no surprise that attention has fallen on the Government, along with what is going to be done to slow down the rapid decline in trade and investment throughout the country.

Even before Rishi Sunak delivered the first budget speech of his tenure as Chancellor last week, the impact of coronavirus was a hot topic, made even more relevant by the fact that the Bank of England decided to slash interest rates to 0.25%.

In response, the Chancellor introduced policies like £7bn in support for the self-employed, businesses and vulnerable, as well as a £5bn emergency response fund for the NHS. Just one week later, however, and the situation has been completely turned on its head.

In light of updated medical advice and strategies, there are now much higher financial measures in place to support businesses through this uncertain time. A £350bn package is now available for companies with £330bn in loans, and £20bn in other aid.

In addition to this, the government will pay the wages of employees unable to work due to the pandemic, in a move to protect jobs. They will pay 80% of salary for staff who are kept on by their employer, covering wages of up to £2,500 a month.

Even with this much support, which may seem like a way out for businesses in the coming months, careful consideration needs to be made before taking on so much debt. Small companies may wind up paying a vast majority of their profit margins back to the Government if they act without thinking.

Fast forward since the budget announcement and the Bank of England made another sweeping move by slashing interest rates for the second time in a week; this time from 0.25% to 0.1%, the lowest they have been in the Bank of England’s 325 year history. Partner this with the fact that the pound has dropped to its lowest level in 30 years and you begin to realise just how much of a downturn in public spend is to be expected.

Make no mistakes; businesses need cash flow, and they need it quickly. This is going to be an extremely challenging period for so many business owners, but the fact that China has begun to report no new cases 80 days on from the first reported case of COVID-19, there is but a flicker of hope.

Empty words and promised loans will not serve as the long term solution in paying rents, rates and supporting livelihoods; cash flow will.

#Coronavirus #COVID-19 #Rishi Sunak #UK Government

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