Cost of U.K. Coronavirus Support Jumps About $12 Billion in a Week

(Bloomberg) --

The cost of the U.K. government’s programs to support the economy through the coronavirus crisis increased by more than 10 billion pounds ($12.3 billion) in the space of a week -- a stark reminder of the heavy price the Treasury is paying to keep businesses afloat.

Data released Wednesday showed the government spent nearly 50 billion pounds across its various jobs and loans plan as of May 24, up from less than 40 billion a week earlier. As part of that plan, the government is now paying the wages for about 10.7 million jobs.

The figures underscore the enormous challenge facing U.K. Chancellor of the Exchequer Rishi Sunak as he tries to find ways to gradually withdraw support package without causing unemployment to surge to levels not seen since 1930s. A survey of economists released by the Treasury this month showed concern it will take years to recover from the massive spending spree, with the annual budget deficit still likely be close to 100 billion pounds, or 4% of gross domestic product, by 2025.

Borrowing is forecast to be about 270 billion pounds this year, up from a little over 60 billion pounds before the crisis.

Sunak will announce this month how he will taper his much-heralded jobs retention program between August and October. A government official said Tuesday that the finance minister is set to close the government’s coronavirus wage support plan to new entrants. The furlough program pays workers 80% of their normal wages, up to 2,500 pounds a month.

While a large part of the spending so far has been on loans, even that could have a lasting damage. A survey by the Business Banking Resolution Service last week found that more than 40% of firms do not intend to repay money taken out through guaranteed loan plans such as the Bounce Back Loan program and Coronavirus Business Interruption Loan Scheme.

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