Britain Extends Stimulus Fund Support to Larger Enterprises

The Government of United Kingdom has now announced that it will be extending its stimulus funding support to larger companies as well to those who would not be able to avail of the bond repurchase scheme announcement, made by the Bank of England last month. It had come to light that after the announcement many of the large companies in the country would not be able to avail the scheme, as the investment ratings of their commercial papers were quite low due to poor financial health, making them ineligible. While making the announcement, the Chancellor of the exchequer Rishi Sunak stated that by extending this scheme he wants to make sure that no viable business in the country should slip through the safety net of support that has been extended by the government, as it tries to help protect businesses and livelihoods in the country while they try to sail through the current treacherous period. The coronavirus pandemic has forced the government to impose a lockdown in the country last month, which some experts say could last as long as six months. The Office of the Budget Responsibility had stated in a report published earlier this week that the lockdown could result in the British GDP shrinking by nearly 35 per cent in the quarter April to June 2020, and for the entire year by about 13 per cent.

The Coronavirus Large Business Interruption Loan Scheme, which is set to be launched by the government on Monday 20^th of this month previously were not included companies having revenues in excess of £500 million, however, now all companies having revenues in excess of £45 million will be eligible. It is to be noted here that the government has been worried lately on account of a series of reports being published by important state agencies, indicating that despite the government’s announcements made so far, the economy is going to fare miserably, and unemployment is going to skyrocket. Earlier in this week on Tuesday 14^th the Office for the Budget Responsibility (OBR) in a report had estimated that of the total workforce in the country nearly 30 per cent are expected to be Furloughed by their employers, while also estimating that inspite of the stimulus packages and other measures being announced by the government to help contain the unemployment levels in the country, the figures are still likely to rise by 2 million in the coming few months which comes to about 10 per cent of the current workforce in the country. Meanwhile, the British Chambers of Commerce has also published a report day recently on the 15^th of this month, which stated that as many as two-third of the companies in the country are expected to avail of the governments Furloughing scheme as against an earlier government estimate of only 10 per cent, which is expected to cost the exchequer nearly four times more at £40 billion against an earlier government estimate of £10 billion. In yet another survey conducted by the Office of the National Statistics, it was found that as many as 25 per cent of the companies in the country have either closed their businesses temporarily of hav halted trading till better times come to prevail.

The extension being provided by the government is to the scheme already announced by it, where a 330 billion-pound loan guarantee programme was announced by the Chancellor Sunak, which was to be implemented in conjunction with the Bank of England’s stimulus measures. The scheme essentially entails that companies with a turnover of more than 250 million pounds will be allowed to make a borrowing up to 50 million pounds from banks and other lenders, against a previously set target of 25 million pounds. The British Chancellor of the exchequer had said on Thursday that the government would do everything in its powers to protect the businesses and livelihoods in the country. Also, commenting on these latest developments the director-general of the British Chambers of Commerce Adam Marshall said that by extending the stimulus scheme an important gap has been filled in, with the government support being extended to the larger arena of industries and that could make a real difference to medium-sized and larger-firms currently navigating through the challenging times. The banks, on the other hand are already reporting a huge backlog of application received from companies across the country who are seeking support under this scheme, and the current extension is likely to increase in their workload further. It is worth noting here that the British government had during the month of March rolled out various stimulus measures to protect the businesses in the country form the pandemic induced slowdown and the unemployment rate from climbing. Despite which the record number of people are on the verge of unemployment, as is being reported by various government departments and agencies. Only a day back, the British Work and Pensions office reported that the welfare benefit claims in the country have reached a staggering number of 1.4 million during the period since prime minister Boris Johnson called on the citizens to stay at home in the wake of a greater number of people in the country being infected by the pandemic while announcing the lockdown.

There are several companies in the country who are on the verge of collapse and have been vying for governments support to keep themselves afloat. The prime example is the British Aviation sector which has been counting unsurmountable losses per day as most of the fleet of aircraft are grounded, yet their maintenance costs have to be born. The industry representatives had met the Chancellor last month for relief upon which the government had indicated that it would look into the concerns of the industry and take appropriate steps.

The industry has several large companies that are on the verge of collapse, and it is widely reported that the measures being taken by the British government may not be sufficient to prevent many of the companies from imminent collapse; however the efforts being made so far should ensure that the better ones will survive and lead the path in the economic recovery of the country.

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