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UK chancellor to set out more support measures as shutdowns loom

Oscar Williams-Grut
·Senior City Correspondent, Yahoo Finance UK
·3 min read
Britain's Chancellor of the Exchequer Rishi Sunak holds a virtual news conference in Downing Street, London, Thursday Sept. 24, 2020. Britain’s treasury chief has announced a new income support program for workers hurt by the coronavirus pandemic as the government races to prevent widespread layoffs when earlier employer subsidies end next month. (John Sibley/Pool via AP)
Britain's Chancellor of the Exchequer Rishi Sunak holds a virtual news conference in Downing Street, London, Thursday Sept. 24, 2020. Photo: John Sibley/Pool via AP

UK chancellor is set to announce new support measures for the economy on Friday, ahead of an expected increase in restrictions to cope with the second wave of COVID-19 infections sweeping Britain.

The Treasury confirmed that Rishi Sunak would announce supplementary measures to his Winter Jobs Plan on Friday.

“The chancellor will be setting out the next stage of the Job Support scheme later today that will protect jobs and provide a safety net for those businesses that may have to close in the coming weeks and months,” a spokesperson said.

Details and timing of the announcement were unclear.

Watch: What is the government’s job support scheme?

It comes amid widespread reports that the government will announce a new, tougher system of restrictions next week. Downing Street is expected to announce a three tiered “traffic light” system for local lockdowns. Areas with the highest infection rates would face near full lockdowns, according to the BBC.

Plans to reimpose lockdowns and harsh restrictions on the population come as the government’s flagship job support scheme is due to end. The furlough programme closes at the end of the month and will be replaced with a scheme subsidising the wages of staff who work part time. Economists say the new programme will not have the same impact as the furlough scheme. A full lockdown would also prevent many employees from working part time, thus locking them out of the scheme.

READ MORE: UK economy slows further in August despite Eat Out to Help Out

Robert Wood, Bank of America’s chief UK economist, said measures to be announced by Sunak on Friday would unlikely to be as generous as March’s support package.

“We struggle to see fiscal measures providing as much of an insurance policy as they did in the spring,” he said.

Wood said the sky-high cost of measures announced in the spring had put pressure on public finances, limiting the amount Sunak could spend on further supporting jobs and businesses.

“The UK government has switched from saying it will do 'whatever it takes' to support the economy to, in PM Johnson's words this week, 'whatever it can',” Wood said.

The UK’s hospitality industry is likely to be a key target for government restrictions. Cabinet Office analysis, published on Thursday, suggests about 30% of COVID-19 transmission occurs outside the home.

Kate Nicholls, head of industry group UKHospitality, called for specific furlough measures to support the sector.

“The inarguable fact is that all of the restrictions currently in place or under consideration, make it impossible for most venues to operate anywhere near profitably,” she said.

“To save jobs and businesses, government support for hospitality must be at the same levels of the furlough scheme where there are forced closures, and two thirds of wages where curfews and other restrictions are seeing trade hit hard.”

New data released by the Office for National Statistics on Friday showed the UK economy was already losing momentum even before the imposition of stricter measures. GDP grew by just 2.1% in August, well undershooting economists’ forecasts and marking the third month of slowing growth.