UK Chancellor of the Exchequer Rishi Sunak announced Thursday a five-month extension of the government’s furlough scheme to the end of March and enhanced help for self-employed workers affected by the coronavirus.
The extension to the furlough or Coronavirus Job Retention Scheme comes after Prime Minster Boris Johnson’s Saturday announcement that the scheme would continue beyond its 31 October closing date to 2 December. England is currently under a four-week lockdown until that date.
The Job Support Scheme, which was due to come into effect on 1 November, remains postponed.
Government support for employees means they will receive 80% of their current salary for hours not worked until 31 March — up to a maximum of £2,500 a month. Employers will only be asked to cover National Insurance and employer pension contributions for the hours their employees don’t work.
The Treasury will review the scheme in January “to decide whether economic circumstances are improving enough to ask employers to contribute more”.
The Job Retention Bonus will now not be paid in February as announced in July. Instead, the government will “redeploy a retention incentive at the right time”.
Sunak said in a press statement: “It’s clear the economic effects are much longer lasting for businesses than the duration of any restrictions, which is why we have decided to go further with our support.”
There is also a change to support for self-employed workers through the Self-Employment Income Support Scheme. The third grant for the self-employed covering November to January will be calculated at 80% of average trading profits, up to a maximum of £7,500, the government said.
The government provided further details of the changes.
Bank of England prediction
Meanwhile, at its Wednesday meeting, the Bank of England’s Monetary Policy Committee predicted that UK unemployment would peak at around 7.75% in the second quarter of next year, up from its current rate of 4.5%.
The committee decided unanimously to maintain the base rate at 0.1% and also decided on a further round of quantitative easing using central bank reserves to “increase the target stock of purchased UK government bonds by an additional £150 billion”, according to the meeting summary. This takes the total stock of government bond purchases to £875 billion.
— Oliver Rowe (Oliver.Rowe@aicpa-cima.com) is an FM magazine senior editor.df
The Bank of England increased its already huge bond-buying stimulus by a bigger-than-expected $195 billion as it prepared for economic damage from new coronavirus lockdowns and the looming risk of Brexit.
Editor’s note: The following is a transcript of the accompanying video. ©2020 Thomson Reuters.
A hazy start to day one of a fresh lockdown in England. Much of London's skyline was masked by thick fog on Thursday [5 November]. But the Bank of England was hoping to provide some light as it prepared for impending economic damage from the new restrictions as well as the looming impact of Brexit.
Britain's central bank increased its already huge bond-buying stimulus by a bigger-than-expected $195 billion and raised the total size of its asset-purchase program to $1.16 trillion. That was more than expected by most economists in a Reuters poll. But the bank said the move would give it enough firepower to stretch its buying of government bonds through to the end of next year.
Forecasts for Britain's economy were also slashed in its quarterly outlook. Previously, the BoE had expected the recovery to be complete by the end of next year. Now the central bank says, "the outlook for the economy remains unusually uncertain". It predicts Britain's economy will shrink by 2% during the fourth quarter of this year, as England re-enters lockdown.
Britain's economy has been supported by a surge in debt-fuelled spending by the government. The BoE has been buying up many of those bonds. Rates remained on hold on Thursday, as expected, and there was little mention of any plan to take them below zero.
There was confusion, though, over how the news about the expansion of QE had been reported early by The Sun newspaper. Bank of England Governor Andrew Bailey said he would look into the circumstances surrounding an article published by The Sun late on Wednesday [4 November].