Faced with crisis, UK abandons budget, expands emergency aid measures

Chancellor of the Exchequer Rishi Sunak, in London, September 24, 2020.

Dark suit, severe tone, Rishi Sunak, the British Chancellor of the Exchequer, on Thursday September 24 in the House of Commons acknowledged the severity of the economic crisis facing the United Kingdom: “I cannot save all businesses and all jobs. No chancellor could. “ According to forecasts by insurer Allianz, the British recession in 2020 should reach -11.8%, making the European country the most affected, tied with Spain.

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Faced with this economic collapse, Mr. Sunak had planned to present a major stimulus plan in the fall, like what France has just done. The health situation forces him to give it up. His government has just announced new restrictive measures, in an attempt to stem a second wave of the pandemic. Pubs and restaurants must now close at 10 p.m., employees are encouraged to telecommute, and in some areas meetings between different households are prohibited. “It is clear that for the next six months at least, the virus and the restrictions will be part of our lives”, explains Sunak. The hope of a short and fleeting crisis is buried.

Cash injection

In these circumstances, there is no longer any question of presenting a recovery plan with targeted sectoral measures. Companies may not be able to take advantage of this while the economy remains partially closed. The time remains for emergency measures and the direct injection of liquidity.

Mr. Sunak therefore presented two major measures on Thursday. First, he decided to extend the partial unemployment program. This, which was to stop at the end of October, is extended for another six months. However, it changes shape a bit. Until now, an employee could receive up to 80% of his salary while staying at home. From now on, he will have to work at least a third of the time provided for in his contract, paid by his employer, while the State will pay the remaining two-thirds. The aim is to prevent unsustainable jobs from being artificially kept alive.

Store attendance has stagnated since early September and remains at 80% of last year’s level

Then, the British state extends access to emergency liquidity for companies. Since the beginning of the crisis, various measures had enabled them to obtain loans guaranteed by the State. Their repayment, initially planned for a maximum of six years, can now be spread over ten years, and in certain cases without interest. Likewise, the reimbursement of certain deferred taxes may be staggered. Finally, the reduction in VAT on the hotel and restaurant sector, which was to end in January, will be continued until March 2021.

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