British finance minister Rishi Sunak said the government will provide a coronavirus business interruption loan scheme for banks to offer loans to support small and medium-sized businesses as part of a £30 billion fiscal stimulus.
Announcing a series of measures in the first budget of the new government to support the economy through the virus crisis, Sunak has had to hastily rewrite the government's financial plan after being appointed just four weeks ago. The number of confirmed cases of the novel coronavirus in the U.K. rose to 456 on the day of the budget announcement, an increase of 83 from the prior day's 373 cases.
Sunak launched a £1 billion loan guarantee scheme for banks lending to small businesses on amounts up to £1.2 million. He said the government will cover up to 80% of losses on banks' loans to businesses in order to ensure they can "lend with confidence" and that funding does not dry up.
"Business supply chains will be disrupted, our productive capacity will shrink, demand will be impacted because of a reduction in consumer spending. The virus will have a significant impact on the U.K. economy but it will be temporary," he said.
The finance minister also said he had been working closely with the governor of the Bank of England Mark Carney to coordinate measures to tackle the impact of the virus. He also said he had been in regular contact with finance ministers of other G7 countries.
The BoE slashed interest rates to 0.25% from 0.75% earlier on March 11 and unveiled a series of measures including loans to banks to encourage small business lending.
'We will get through this together'
Sunak said his fiscal stimulus package was worth £30 billion including the loan guarantee scheme, as well as scrapping business rates for smaller hospitality customers and leisure firms and providing £3,000 in cash for all smaller businesses that currently do not pay business rates at all.
He warned of a significant but temporary interruption to the U.K. economy, but said the economy was robust and the public finances were sound. "We will get through this together," he said.
Sunak said up to 20% of the working age population could be off work at the same time as a result of the virus and said the government will fully meet the cost of providing statutory sick pay for up to 14 days for workers in firms with up to 250 employees, providing more than £2 billion for up to two million businesses.
The independent Office for Budget Responsibility slashed its forecasts for the U.K. economy, warning that growth will slow to 1.1% in 2020, from 1.4% in its March prediction. However, growth is likely to be much weaker as the OBR's forecasts do not take into account the effects of the coronavirus.