U.K. Promises Extra Help for Business as Virus Triggers Shutdown
U.K. businesses struggling to avoid collapse will be promised extra help by Boris Johnson’s government.
(Bloomberg) -- U.K. businesses struggling to avoid collapse will be promised extra help by Boris Johnson’s government as the coronavirus inflicts further damage on the global economy.
Airlines, tourist attractions, restaurants, bars and theaters are among organizations facing a bleak outlook after the prime minister announced curbs on public events, travel and social gatherings.
On Tuesday, Chancellor of the Exchequer Rishi Sunak will seek to deliver on his promise in last week’s budget to help companies and individuals pushed to the brink by the virus emergency. He will set out his plans to help industry at a news conference in London.
The offer of aid for companies comes as the virus outbreak spreads across the U.K. On Monday Johnson announced what he called “draconian” new steps to fight Covid-19, including demands for citizens to avoid all “non-essential” contact with other people.
As the U.K. death toll rose to 55, experts warned the country could see hundreds of thousands more fall victim to the virus. The government said “drastic action” potentially lasting for months or longer is necessary to slow the rate of infections, which are on course to double every five or six days.
At a news conference in London, Johnson said mass gatherings should not take place and called on everyone to work from home if they can.
“Now is the time for everyone to stop non-essential contact with others and to stop all unnecessary travel,” the prime minister said. “We need people to start working from home where they possibly can. And you should avoid pubs, clubs, theaters and other such social venues.”
Johnson’s dramatic statement followed criticism that he has been too slow to take aggressive action to tackle the virus.
Specialists at Imperial College, London, who are advising the government on its response, presented a model suggesting 250,000 people would die from the new coronavirus in the U.K. unless ministers introduced radical new steps to limit public activities.
Such action could reduce the overall death toll until a vaccine is developed, the study found. The “only viable strategy at the current time” is “suppression” of the epidemic, a move that carries “profound” social and economic implications, the researchers said.
Johnson and his ministers insist they have been guided by the best advice of scientists, but some experts and politicians had demanded firmer action sooner, and accused the government of gambling with people’s lives. Despite calls to close schools, Johnson said classes will remain open.
Tough Measures
Officials accepted the package of so-called social-distancing measures will be very difficult for the public, but stressed the plan will reduce deaths during the peak of the outbreak. The government is trying to protect the National Health Service from being overwhelmed by the scale of the pandemic as official estimates suggested as many as 8 million people in England could be hospitalized in a “reasonable” worst-case scenario.
Under what Johnson said was a “draconian” new phase in his action plan:
- If one person in a household has symptoms -- a new continuous cough, or a fever, or both -- the whole household should stay at home for 14 days
- Anyone in a household with a suspected coronavirus case should not leave home, “even to buy food or essentials, other than for exercise, and in that case at a safe distance from others,” Johnson said
- Individuals living alone with symptoms should isolate for 7 days
- People most at risk should be “shielded” from contact with others for 12 weeks from this weekend
- London is at higher risk and residents should ensure they take the advice to avoid contact with others
- Further action, including school closures, may be needed in future
Johnson said staying away from others is particularly important for pregnant women, people over the age of 70 and those with health conditions that put them at greater risk.
The measures will be necessary for “a minimum of weeks or months,” and it may be longer “if we are to minimize mortality,” Chris Whitty, the government’s Chief Medical Officer, said in the televised briefing. The public should realize fighting coronavirus is going to be “a marathon,” he said.
Business Test
The prime minister accepted the measures will be “a very considerable challenge for businesses big and small” and promised the government is doing all it can to ensure companies have the liquidity they need, including through relaxing the tax system.
Johnson said it is “perfectly obvious” the virus will deliver a “potentially severe blow” to the British economy, but “if we work together, we can ensure it is a short term problem.”
Government spending should resemble a “wartime situation,” according to Robert Chote, who chairs the Office of Budget Reprehensibility, the U.K.’s fiscal watchdog. “Now is not a time to be squeamish about public sector debt,” Bean told the House of Commons Treasury committee on Tuesday.
Businesses need to be compensated for lost revenue, which will require the government to step up as a type of national insurer, the OBR’s Charles Bean told the same committee.
“Big, early action is better than halfhearted action delayed,” Bean told the House of Commons Treasury committee on Tuesday. “You need the state to be there as the insurer of last resort against what is essentially an act of God.”
Group of Seven leaders agree markets should have access to liquidity, Johnson said, in answer to a question on the need for a global fiscal stimulus. “If we do things jointly, I think the global markets will understand we are all operating on the same fiscal framework,” he said.
©2020 Bloomberg L.P.
