Following on from our “mini-budget” summary this morning, we consider the impact of the latest announcements.
With the high street name Boots announcing a vast swathe of jobs cuts this week, UK unemployment continues to rise1. October will see the winding down of the furlough scheme, causing the concern that economic demand and consumption will not be enough to protect those who have been furloughed from losing their jobs, a risk that Chancellor Rishi Sunak is all too aware of.
The summer statement delivered by Sunak on Wednesday has provided the UK with a raft of new economic support that could be worth up to £30 billion. He announced that he had a ‘plan for jobs’ and was looking to kickstart a job creation scheme for young people which would pay the wages of new young employees for six months. Initially, £2 billion has been set aside, however the Chancellor has said there will be no cap on the number of places available2. Along with this is the increase in the number of job centre coaches and an apprenticeship scheme that will see businesses supported by bonuses. For every apprentice under 25, hired companies will receive a bonus of £2,000 and £1,500 for those over 253.
As we have discussed before, this crisis was going to take casualties and the names are going to continue. One of the questions we have been asking ourselves is whether many of these businesses would have survived long term if we hadn’t experienced the pandemic. With many sectors such as retail, leisure and entertainment already struggling under large debt burdens and dwindling margins pre-crisis, there is an argument that the economic fallout from COVID has led to an acceleration in the structural change that was needed and always going to happen.
Although it isn’t pleasant to see businesses failing, removing zombie companies (indebted companies that can repay the interest on debts but not repay the principal) will have long term benefits on the health of the economic ecosystem4.
Moving to property (pun intended), and the government announced a stamp duty holiday, rising the threshold from £125,000 to £500,0005. With this applying to first-time buyers who were already entitled to a holiday up to £300,000, the current scheme will be available to current homeowners as well as landlords. Much of the hope is that this will help prop up the housing market in the short term.
The ‘green agenda’ was addressed as part of the summer statement, with the announcement of £5.4 billion ‘green stimulus’, which includes a grant of £2 billion to improve energy efficiency in homes across the country6. Although any step in this direction is pleasing, it does not compare favourably to other European countries. The UK green stimulus plan equates to £80 per person whereas France, Germany and Denmark’s equate to £231, £308 and £615 respectively. It is fair to say that we are falling behind7.
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