A waiter prepares the closing of a pub in London’s Soho area just before the start of a national lockdown for England, Wednesday, Nov. 4, 2020. A second lockdown in England is set to come into force on Thursday. It’s a big blow to businesses that sweeps away any hopes that the British economy might have recovered by the end of this year a large proportion of the near 25% drop endured in the spring. (AP Photo/Alberto Pezzali)

A waiter prepares the closing of a pub in London’s Soho area just before the start of a national lockdown for England, Wednesday, Nov. 4, 2020. A second lockdown in England is set to come into force on Thursday. It’s a big blow to businesses that sweeps away any hopes that the British economy might have recovered by the end of this year a large proportion of the near 25% drop endured in the spring. (AP Photo/Alberto Pezzali)

UK extends wage support scheme until March amid new lockdown

British economy set for another downturn in the winter

LONDON — The British government and the Bank of England joined forces Thursday to provide further support to an economy that is set for a difficult winter following the imposition of new coronavirus lockdown measures.

Hours after the central bank increased its monetary stimulus by a bigger than anticipated 150 billion pounds ($195 billion), Treasury chief Rishi Sunak said the government’s salary support program will be extended through March.

The extension of the program, which sees the government pay 80 per cent of the wages of people retained by firms rather than made redundant, comes on the day that England is back in lockdown and the other nations of the U.K. — Scotland, Wales and Northern Ireland — are living under heightened restrictions as a result of surging coronavirus infections.

The extension to the salary support program follows the government’s decision last week to reinstate it at least until Dec. 2, when the lockdown in England is due to end. The Bank of England expects the number of people on furlough to more than double in November to 5.5 million. At the height of the program in the spring, around 9 million workers were on furlough.

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

“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.”

The Bank of England warned that the British economy is set for another downturn in the winter but laid out the hope that a recession — widely defined as two straight quarters of contraction — may be avoided. It said the outlook for the economy remains “unusually uncertain.”

The latest restrictions will weigh on an economy that had been recovering from the sharp recession caused by the spring lockdown. During the earlier lockdown, the British economy contracted by around a quarter. It recouped some of that during the summer, though the bank said it was still 9 per cent smaller than its pre-COVID level at the end of the third quarter.

In a set of new forecasts, the central bank said it now expects that recovery to end and the economy to shrink 2 per cent in the fourth quarter before rebounding at the beginning of 2021 — assuming the restrictions start to be lifted. As a result of the latest contraction, it now doesn’t expect the British economy to reach its pre-COVID level until the first quarter of 2022.

The central bank’s increase in the bond-buying program was bigger than the 100 billion pounds anticipated in financial markets and is aimed at keeping borrowing rates low to boost lending and ensuring that money keeps flowing through the financial system.

“We believe there is value in acting quickly and strongly to support the economy and avoid the risks of any short-term disruption,” Bank Governor Andrew Bailey told reporters.

The nine-member Monetary Policy Committee, which also unanimously kept its main interest rate at the record low of 0.1 per cent, welcomed the decision by the government to extend the salary support program.

Though the program prevented mass unemployment this year, the jobless rate has edged up from a four-decade low of 3.8 per cent to 4.5 per cent, with the likes of British Airways, Royal Mail and Rolls-Royce all laying off thousands.

On Thursday, supermarket chain Sainsbury’s became the latest big company to announce hefty cuts. It said it will shed around 3,500 jobs as part of plans to permanently close its meat, fish and deli counters, as well as some of its Argos standalone stores.

Given the outlook, the Bank of England expects the unemployment rate to rise to a peak of 7.75 per cent in the second quarter of next year.

By The Associated Press

CoronavirusUnited Kingdom

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Photo from Town of Sylvan Lake Facebook page
Sylvan Lake communities band together on development plan

Sylvan Lake Intermunicipal Development Plan expected to be approved next spring

Tribe restaurant owner Paul Harris, left, consults with manager Brandon Bouchard about how to proceed under pandemic rules that make it hard for eateries to be profitable. (Contributed photo).
New pandemic rules deemed workable for Red Deer retailers

Stricter COVID-19 reduction measures introduced in lead-up to Christmas

Quentin Lee Strawberry
Man accused in 2019 Red Deer murder will stay behind bars

Quentin Strawberry going to trial next year on second-degree murder charge

Dow Chemicals employees recently volunteered at Habitat for Humanity's Blackfalds project. The federal government announced Wednesday that it is also supporting the affordable housing project. Photo contributed
Habitat for Humanity gets funding for Blackfalds housing project

Habitat for Humanity’s Blackfalds housing project will get some support from the… Continue reading

City of Red Deer Mayor Tara Veer (Advocate file photo).
Veer urges indoor mask wearing immediately

We must protect hospital capacity and each other, says Tara Veer

The Alberta government passed new, stricter COVID-19 measures across the province on Tuesday. THE CANADIAN PRESS/Graham Hughes
Here’s a list of Alberta’s new COVID rules

The Alberta government has provided a list of new COVID-19 measures to… Continue reading

A
Red Deer Games Foundation adjusts grant program due to COVID-19 pandemic

The Red Deer Games Foundation announced Wednesday that it will allow athletes… Continue reading

In this undated photo issued by the University of Oxford, a volunteer is administered the coronavirus vaccine developed by AstraZeneca and Oxford University, in Oxford, England. Pharmaceutical company AstraZeneca said Monday Nov. 23, 2020, that late-stage trials showed its coronavirus vaccine was up to 90% effective, giving public health officials hope they may soon have access to a vaccine that is cheaper and easier to distribute than some of its rivals. (University of Oxford/John Cairns via AP)
POLL: When a COVID-19 vaccine is available, will you get the shot?

When a COVID-19 vaccine is available, will you get the shot?… Continue reading

The tournament was cancelled because of the ongoing COVID-19 pandemic. (Image courtesy of WHL)
2020 WHL Cup cancelled

A tournament featuring the top under 16 male hockey prospects in Western… Continue reading

TORONTO, ON - DECEMBER, 7  - Susan Delacourt
Logo headshots of Toronto Star staff shot in Star studio.
December 7, 2015
Opinion: Don’t blame Trump for vaccine wait

Canadians will be getting COVID-19 vaccinations after Americans, Justin Trudeau has admitted,… Continue reading

QMJHL Roundup: Armada down Olympiques to extend win streak to seven games

QMJHL Roundup: Armada down Olympiques to extend win streak to seven games

Nashville SC ends Toronto FC’s season with stunning 1-0 extra time upset

Nashville SC ends Toronto FC’s season with stunning 1-0 extra time upset

Juve, Barça, Chelsea, Sevilla advance in Champions League

Juve, Barça, Chelsea, Sevilla advance in Champions League

Most Read