The government has unveiled a package of financial measures to shore up the economy against the coronavirus impact.
It includes £330bn in loans, £20bn in other aid, a business rates holiday, and grants for retailers and pubs. Help for airlines is also being considered.
Chancellor Rishi Sunak told a press conference it was an “economic emergency. Never in peacetime have we faced an economic fight like this one.”
From the hospitality industry to the airline sector, companies have warned that their long term survival is under threat.
Mr Sunak said: “This is not a time for ideology and orthodoxy, this is a time to be bold, a time for courage. I want to reassure every British citizen this government will give you all the tools you need to get through this.
“That means any business who needs access to cash to pay their rent, their salaries, suppliers or purchase stock will be able to access a government-backed loan or credit on attractive terms.
“And if demand is greater than the initial £330bn [for loans] I’m making available today, I will go further and provide as much capacity as required. I said whatever it takes, and I meant it,” he said.
Prime Minister Boris Johnson said during the same media briefing that “we must do whatever it takes to support the economy”. He added: “This a time to be bold, to have courage. We will support jobs, we will support incomes, we will support businesses… We will do whatever it takes.”
Mr Sunak said: “Some sectors are facing particularly acute challenges. In the coming days, my colleague the Secretary of State for Transport and I will discuss a potential support package specifically for airlines and airports.”
The chancellor said he was extending the business rates holiday to all firms in the hospitality sector and funding grants of between £10,000 and £25,000 for small businesses. And Mr Sunak said that for those in financial difficulty due to coronavirus, mortgage lenders will offer a three-month mortgage holiday.
BBC personal finance correspondent Simon Gompertz said it was important for borrowers to remember that they would have to make up the payments at a later date.
“The result is that you have some breathing space but when you resume payments the amount will be adjusted to be slightly higher, because the missed interest payments have been added to the loan,” he said. “This doesn’t mean the mortgage holiday is a bad idea.”
‘No time for ideology’
The chancellor unveiled the measures after the government’s chief scientific adviser said about 55,000 people in the UK now have Covid-19, as the NHS moved to cancel all non-emergency surgery and 71 people are now known to have died.
“Whatever it takes” was the promise from the chancellor to support businesses, families and individuals through the coronavirus crisis. It was a phrase successfully used by a European central banker eight years ago – and effectively calmed a significant eurozone crisis.
But this intervention is a bigger bazooka than that, because the challenge of coronavirus and the measures to contain it pose to peoples livelihoods and wellbeing are more significant.
The extraordinary figure here was £330bn in state-backed loans for all businesses through the banking system with the help of the Bank of England.
That is 15% of the value of the economy. Normally economic announcements are worth a fraction of a percent of national income – this move is about a fraction of our entire GDP. And that is because the self-isolation and suppression moves announced yesterday will remove a chunk of our economy.
At a stroke, every single forecast number in the Budget the chancellor gave less than a week ago are out of date. We are in an entirely new world. A wartime effort, with wartime deficits to cover it.
It’s not just there will be less tax and more income support required, which typically causes deficits to spike in recessions. Now we face the need for subsidy and provision of incomes in these very tough times.
This is not a bailout. It’s a very expensive bridge that the government cannot afford to fail to build.
Companies and trade bodies welcomed the announcement, but said they needed to work through the fine print. Like several sectors, the aviation industry has warned it is in a fight for survival as travel bans are put in place and travellers delays bookings.
Johan Lundgren, chief executive of Easyjet, said Mr Sunak’s measure were welcome, but added: “Airlines are facing significant pressure and without government action there is a real risk to the industry. It will be important to work through the detail, but we are already talking to government.”
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‘Not well targeted’
Retailers, too, have warned the future looks grim without help. The British Retail Consortium (BRC) said the new measures would help ease the burden.
BRC chief executive Helen Dickinson said: “The business rates holiday, together with the announcement of a loan package, represent a vital shot in the arm for a sector facing enormous uncertainty. We still need to see the details and make sure that retailers can access cash with the minimum of delay, but it is a welcome and necessary first step to protect jobs.
Adam Marshall, chief executive of the British Chambers of Commerce, said the size of the grants and loans were good news for smaller businesses. “But what’s going to be hugely important . is that cash actually gets to the front line and gets there quickly,” he said.
Paul Johnson, director of the Institute of Fiscal Studies, said the business rates holiday was targeted directly at the retail, leisure and hospitality sectors. But he warned: “This is a substantial level of support. However, it is probably not well targeted at saving jobs in those industries. It will remain as expensive to pay people and if demand is down then jobs are likely to go.”
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
OTTAWA – Canada’s inflation rate fell to two per cent last month, finally hitting the Bank of Canada’s target after a tumultuous battle with skyrocketing price growth.
The annual inflation rate fell from 2.5 per cent in July to reach the lowest level since February 2021.
Statistics Canada’s consumer price index report on Tuesday attributed the slowdown in part to lower gasoline prices.
Clothing and footwear prices also decreased on a month-over-month basis, marking the first decline in the month of August since 1971 as retailers offered larger discounts to entice shoppers amid slowing demand.
The Bank of Canada’s preferred core measures of inflation, which strip out volatility in prices, also edged down in August.
The marked slowdown in price growth last month was steeper than the 2.1 per cent annual increase forecasters were expecting ahead of Tuesday’s release and will likely spark speculation of a larger interest rate cut next month from the Bank of Canada.
“Inflation remains unthreatening and the Bank of Canada should now focus on trying to stimulate the economy and halting the upward climb in the unemployment rate,” wrote CIBC senior economist Andrew Grantham.
Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO, said Tuesday’s figures “tilt the scales” slightly in favour of more aggressive cuts, though he noted the Bank of Canada will have one more inflation reading before its October rate announcement.
“If we get another big downside surprise, calls for a 50 basis-point cut will only grow louder,” wrote Reitzes in a client note.
The central bank began rapidly hiking interest rates in March 2022 in response to runaway inflation, which peaked at a whopping 8.1 per cent that summer.
The central bank increased its key lending rate to five per cent and held it at that level until June 2024, when it delivered its first rate cut in four years.
A combination of recovered global supply chains and high interest rates have helped cool price growth in Canada and around the world.
Bank of Canada governor Tiff Macklem recently signalled that the central bank is ready to increase the size of its interest rate cuts, if inflation or the economy slow by more than expected.
Its key lending rate currently stands at 4.25 per cent.
CIBC is forecasting the central bank will cut its key rate by two percentage points between now and the middle of next year.
The U.S. Federal Reserve is also expected on Wednesday to deliver its first interest rate cut in four years.
This report by The Canadian Press was first published Sept. 17, 2024.
FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.
Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.
The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.
Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.
Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.
Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.
Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.
This report by The Canadian Press was first published Sept. 16, 2024.
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