Bank of England Stimulates Economy as Britain Extends Jobs Support Scheme

November 5, 2020 Updated: November 5, 2020

The British government and the central bank joined forces on Thursday to provide further support to an economy facing a difficult winter following the imposition on the same day of new CCP virus lockdown measures for England.

The Bank of England (BoE) increased its monetary stimulus by a bigger than anticipated £150 billion ($195 billion) just hours before Chancellor Rishi Sunak announced the extension of the Job Retention Scheme, often called the furlough scheme.

“I’ve always said I would do whatever it takes to protect jobs and livelihoods across the UK and that has meant adapting our support as the path of the virus has changed,” Sunak told Parliament.

“It’s clear the economic effects are much longer-lasting for businesses than the duration of any restrictions, which is why we have decided to go further with our support,” he said.

The furlough scheme pays 80 [percent] of the wages of employees rather than them being made redundant. It will be reviewed in January to see whether employers can increase their contributions. It was originally set to end on Oct. 31 and be replaced by a less generous scheme. It will now last until the end of March next year.

Westminster Bridge
Traffic and people pass over Westminster Bridge with a fog shrouded Houses of Parliament and the Elizabeth Tower, known as Big Ben, hidden behind, on the first day of Britain’s second lockdown in London, on Nov. 5, 2020. (Matt Dunham/AP Photo)

As well as the furlough extension, Sunak increased support for self-employed people.

The opposition Labour Party accused Sunak of being behind the curve by announcing four versions of his economic plan in six weeks, raising the risk of workers losing their jobs.

“We need a chancellor who’s in front of the problems we face, not one who’s always a step behind,” Labour’s would-be finance minister Anneliese Dodds said in parliament.

“The chancellor can change his mind at the last minute, Mr. Speaker, but businesses, can’t.”

While announcing its stimulus package the BoE highlighted the benefit of the extension of job support measures to the economy.

“The extended Coronavirus Job Retention Scheme and new Job Support Scheme will mitigate significantly the impact of weaker economic activity on the labour market,” it said in a statement.

‘Unusually Uncertain’ Outlook

However, it painted an “unusually uncertain” outlook for the future amid several variables facing the economy.

“It depends on the evolution of the pandemic and measures taken to protect public health, as well as the nature of, and transition to, the new trading arrangements between the European Union and the United Kingdom,” it said.

“It also depends on the responses of households, businesses, and financial markets to these developments,” it added.

Sunak’s move will be a relief to employers and employees in firms that have had to close as a result of the heightened restrictions and business leaders have welcomed it but cautioned that longer-term investment is needed.

“The Chancellor has built a bridge for business to Spring 2021 and taken much-needed steps to help firms across the UK survive this winter,” Rain Newton-Smith, Confederation of British Industry (CBI) Chief Economist said in a statement.

‘Tried and Trusted’ Job Retention Scheme

She said that extending the “tried and trusted” Job Retention Scheme will give companies “certainty and stability,” and protect jobs.

“The Government must now use its time wisely and the review in January to get ahead of the curve and invest in a long-term vision for the economy,” she said

Mike Cherry national chairman of the Federation of Small Businesses (FSB) also welcomed the measures.

“It’s encouraging to see the extension of generous support to around two million self-employed people—who don’t enjoy many of the benefits afforded to employees, and are the employers of the future—outlined today,” he said in a statement.

He highlighted, however, a concern that many self-employed people are still not supported under the government’s schemes.

“Too many new business owners, sole traders, company directors, and entrepreneurs without business premises are still largely excluded from support measures,” he said.

“That urgently needs to change, and local authorities must use discretionary funds to help these groups wherever possible,” he added.

Britain has seen a sharp spike in new cases in recent weeks and on Wednesday recorded another 492 virus-related deaths, the highest daily number since May. Overall, it has Europe’s highest official CCP virus death toll at 47,742.

AP and Reuters contributed to this report.