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Building bridges was a favorite metaphor of Rishi Sunak during the pandemic to explain his large-scale economic support packages.
To bring the British people through the disruption, trillions of pounds have been spent on wage subsidies, government-backed loans, company grants, and tax cuts. Now, faced with the revival of the virus leading to “Lockdown 3.0″ in England, it is important to resolve another economic activity chasm. As the Covid vaccinations lift expectations that a return to relative economic normalcy is within reach, the Chancellor of the Exchequer knows that a final drive is required. With that in mind, businesses in the economic sectors hit hardest by the latest lockdown in England and tighter regulation in Scotland, Wales and Northern Ireland will receive a new £ 4.6 billion funding package to help them remain alive until the spring. This takes the overall Treasury support for the current fiscal year during the pandemic to £ 300 billion.
The new steps are projected by economists to confirm a double-dip recession for the U.K. Economy, with U.S. investment bank JPMorgan downgrading its outlook from 0.1 percent growth to a 2.5 percent decrease in economic production for the first three months of the year. It’s not quite the scale of the economic crisis triggered by the shutdown in the spring of 2020, when 25 percent of gross domestic product plummeted.
But because of the accumulated damage over the past nine months, the current situation in the country is worrisome.
This period, constraints are anticipated to be harder than during the comparatively soft U.K. Lockdown 2.0″Lockdown 2.0” Schools were ordered to close, affecting working parents and causing further damage, while more restrictions on travel would make January one of the most daunting months in the pandemic. Companies and staff around the country are severely overstretched after nearly a year of stop-start restrictions – and with a very hesitant approach to providing new financial help each time.
At the beginning of the current freeze, the initial response of business leaders is that any additional support is welcome, given the increasing challenges for companies after a challenging year. There are reasons to be optimistic. Unlike the unparalleled Spring 2020 turmoil, when there was no playbook to aim for, in the Covid era, many businesses are learning to adjust to life. The effect on the economy is not supposed to be because there are already massive, government-backed loan programs in place, and the work stoppage is a staple on the business landscape – with a recent extension through the end of April. The additional funding comes on top of that, giving Sunak time to build a more cohesive stimulus package to be announced on March 3 at his spring budget.
In particular, Sunak opposed the extension of VAT cuts and business tax exemptions – two primary demands from business groups – although calls were also made to extend the holiday beyond April. Inevitably, those demands will get stronger. The strong UK Treasury Committee warns that major support shortages that have arisen during the pandemic, affecting millions of employees, including self-employed workers, need to be addressed urgently.
And there are also question marks about the £ 20-a-week rise in Universal Credit payments at a time when unemployment is increasing steadily – more than 2.6 million people are projected to be out of work by the middle of this year. The chancellor’s bridge-building effort remains far from complete, given the size of the cumulative problems after the hardest year for the economy in three decades, and with a return to relative normality with the help of the vaccine within reach.