UK Government reportedly plans to rescue 'strategically important' companies amid COVID-19 crisis
- 25 May 2020
UK Chancellor of the Exchequer Rishi Sunak has approved a plan to save the country's strategically important companies in exceptional circumstances, APA reports citing the Financial Times (FT).
The newspaper cited unnamed Treasury sources as saying that the so-called Project Birch plan stipulates the government would shore up any companies whose possible collapse would "disproportionately harm the economy" amid the ongoing coronavirus crisis.
The sources claimed that Sunak had authorised the Treasury's capacity to deal with bailouts of "viable companies which have exhausted all options" and that any support would be rendered on a "last resort basis".
Bloomberg also quoted the Chancellor of the Exchequer's allies as saying that the Treasury doesn't plan to initially seek equity stakes in struggling companies, and would instead focus on extending loans.
Earlier this week FT reported about tensions between Sunak and Prime Minister Boris Johnson over the speed at which the UK's COVID-19 lockdown is lifted, which come amid the Treasury's increasing concerns over public finances being damaged by the pandemic.
"Somehow Greece and Italy are opening up. This country can't be the only place in the world where people can't go and have a drink in the pub. The single best way to help tourism in this country is to allow people to open up", Sunak reportedly told Tory MPs.
Johnson, for his part, said earlier in May that the government would "advance with maximum caution" when it comes to the easing of the lockdown which envisages, in particular, that the nation's hospitality sector, including hotels, pubs, and restaurants, will not be allowed to completely reopen until 4 July at the earliest.
In another development, the Office for National Statistics said in mid-May that from January to March 2020, the UK's Gross Domestic Product (GDP) shrank at least 2.0% from the last three months of 2019. It is the largest quarter-on-quarter fall since the end of 2008, when the financial crisis hit its peak.
Rishi Sunak said at the time that the figures were not surprising as the UK is facing a "severe impact" from the ongoing coronavirus pandemic.
The Bank of England, for its part, said in a report that it expected the country's GDP to see a 14 percent decrease in 2020 but that it may increase by 15 percent in 2021.
"UK GDP in the scenario falls by 14% in 2020 as a whole. Activity picks up materially in the latter part of 2020 and into 2021 after social distancing measures are relaxed, although it does not reach its pre‐COVID level until the second half of 2021. In 2022, GDP growth is around 3%", the monetary policy report argued.