Latest Coronavirus Government Lending Figures
| Scheme | Value of facilities approved | # of facilities approved | Total number of applications |
|---|---|---|---|
| Bounce Back Loan Scheme (BBLS) | £38.02bn | 1,260,940 | 1,552,727 |
| Coronavirus Business Interruption Loan Scheme (CBILS) | £15.45bn | 66,585 | 142,076 |
| Coronavirus Large Business Interruption Loan Scheme (CLBILS) | £3.84bn | 566 | 992 |
*As per the latest official figures reported to the Treasury at close of play on 20th September
Rishi Sunak should consider an extension of the furlough scheme, according to a number of MPs. With the pandemic continuing to wreak havoc on the UK economy, mass long-term unemployment and unsupported firms facing insolvency are now very genuine concerns. A ‘blanket retention’ of the scheme however would not be deemed economically viable, according to the Treasury Select Committee. With the Coronavirus job retention scheme currently set to end next month on October 31st, to date workers placed on furlough have received 80% of their pay up to a maximum of £2,500 per month. Initially this was entirely funded by the government however as the scheme began to wind down this month, firms have had to start making a contribution to employee wages. Having previously stated that extending the furlough scheme would “only keep people in suspended animation”, Prime Minister Boris Johnson now has some very critical decisions to make on the future of the scheme, given the longevity of this pandemic. It has been well documented that Chancellor Rishi Sunak does not favour an extension, instead seemingly favouring a £1000 ‘bonus’ given to firms for every furloughed worker still in employment at the end of January 2021. It’s been an unenviable task for this government as never seen before challenges have pushed them to
respond in ways many of us never expected, but proceeding with the £1000 grant for businesses with furloughed workers seems a drop in the ocean when you look at the bigger picture.
Elsewhere, in more positive news the UK economy grew by 6.6% in July according to official figures released this month by the ONS. Of course, this is still far below pre-pandemic levels however it is the 3rd month in a row the economy has expanded. Bringing us down to earth, the ONS went on to say ‘the UK has still only recovered just over half of the lost output caused by the coronavirus’. This is obviously not unexpected, it had been widely reported that the economy was still 11.7% smaller than it was pre-lockdown in February. It should be noted however that there are some signs to be optimistic about, with the re-opening of pubs and restaurants meaning the accommodation and food services sector grew by a massive 140% between June and July. The knock on effect for the alcohol industry also saw a significant increase of 32.7%. Again however, to offer some balance, activity in the accommodation and food services sector was still 60% below the level registered in February. The consensus from many economic advisors is still that a recovery to pre-pandemic levels will be well into the later stages of 2021.
There has also been much talk of negative rates this month, bringing the cost of borrowing to below zero. Speaking out against such a notion, The Bank of England’s deputy governor (Sir Dave Ramden) has placed his opposition on public record: “At present, negative policy rates would be less effective as a tool to stimulate the economy,” Sir Ramsden told the Society of Professional Economists (SPE). Having already slashed rates to just 0.1%, some are calling for the BOE to act again to encourage banks to lend money to businesses as opposed to depositing it. It has to be said however, with interest rates already low Sir Ramsdens opposition to further cuts seems justified, certainly in terms of the actual impact it will have. It’s not a measure we can see being employed but man of the measures we’ve seen thus far have been unprecedented so you can never rule anything out. We’ll see if this gathers momentum as the pandemic continues.
As always, good luck with everything, stay safe and if we can help in any way we’re happy to do so.
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