05 May 2020

Fiscal stimulus as never seen before

The coronavirus crisis has transformed the fiscal landscape in the UK. Britain was on course for a budget deficit of £55 billion in the next tax year, but now borrowing could be as much as £200 billion as the government pledges to support our work force.

The resulting deficit would be just below the 10% reached in the aftermath of the financial crisis of 2008.

The chancellor of the exchequer, Rishi Sunak, announced his first economic package to deal with the outbreak when delivering the budget on March 11th, unveiling £12 billion of measures to mitigate the effects of the outbreak on the economy.

As evidence mounted that the crisis was snowballing, he followed up with a £350 billion stimulus package comprising government-backed loans as well as £20 billion of grants and tax cuts for struggling companies.

Then, he announced £7 billion of extra welfare spending and said the government would pay 80% of salaried employees’ wages up to a maximum of £2,500 a month, and 80% of trading profits of the self-employed also capped at £2,500 per month.

Announcing further details of the job-retention program, the Treasury said the government will also cover employers for the National Insurance and minimum auto-enrolment pension contributions of furloughed workers, saving firms £300 a month per employee on average.