PROFESSOR DYLAN JONES-EVANS

Since the UK’s first Indian-origin Prime Minister was asked to form a government by King Charles III two weeks ago, many are still trying to work out how Rishi Sunak will work with his colleagues to close the massive hole in public finances and reduce the impact of increased energy prices. The forthcoming Autumn Statement has not been made any easier by the Bank of England’s decision to raise interest rates to 3% last Thursday. The rationale for this increase, as has always been the plan from Threadneedle Street, is to bring inflation under control when there are fears, if the issue of rising prices is not addressed, that it may become embedded into the economy with catastrophic results.  However, this decision will not help those many households and businesses that, in the short term, will face a rise in borrowing costs at a time when other financial pressures such as wage costs and energy bills are also increasing. The Government will rightly argue that it is the job of an indepe...

This week’s economic data confirmed what everyone already knew several weeks ago namely that the UK economy had entered a recession during the second quarter of 2020, shrinking by over 20 per cent in the period April to June of this year.  Comparisons with other countries suggest that this could be the worst economic hit for any major economy from Covid-19 during this period although it is fair to say that the UK was also one of the last countries in Europe to lockdown its economy. As expected, the biggest impact has been on the accommodation and food services with estimates that output had shrunk by 87% across the three months with other statistics showing that only a quarter of businesses in this sector remained open as compared to four out of five firms in the rest of the economy. In addition, labour market data also showed that over the same period, employment in the UK fell by the largest amount since the last recession with the number of people in work decreasing by 220,000....

As we end the sixth week of lockdown for the UK economy, the government continues to adjust its support for businesses affected by the Covid-19 shutdown.  This flexibility amongst politicians is a breath of fresh air and the Chancellor Rishi Sunak must be congratulated for responding to the concerns of entrepreneurs and CEOs. The latest initiative involves changing the terms and conditions of the Coronavirus Business Intervention loans scheme (CBIL) which had attracted much criticism for being too slow in getting money out to struggling firms across the UK. For once, Whitehall was not to blame and instead, the banking industry seemed to have been unable to cope with the demand for this type of lending through their present systems.  There was also the suspicion that some lenders were, instead of piling in to help the small firm sector in the way that they had been supported by the taxpayer during the last recession, were reluctant to risk any of their own funds under a scheme ...

It was never going to be an easy task for the new Chancellor of the Exchequer to deliver a budget four weeks into his new job and with the ongoing crisis of the coronavirus outbreak at the front of everyone’s mind.  But from the point of view of the majority of firms, many would agree that he succeeded in making this the most business friendly budget for some time last week. Obviously, the headlines were his in initial efforts to support firms during the expected shutdown over the next few months to control the Covid-19 virus such as full business rate relief for the majority of small firms. Not surprisingly after the UK essentially came to a halt earlier this week, he vastly extended the amount of support last night by setting aside £330 billion of government guaranteed loans for struggling businesses with funding of up to £5 million available to each business with no interest for five months. No doubt this will be critical in ensuring that the majority of small to medium sized bu...