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Additional announcements from this week...

10 July 2020

The UK Chancellor Rishi Sunak’s summer statement delivered on much of the previously leaked policy announcements. Sunak pledged that he will not idly stand by and watch unemployment surge ever higher, announcing a new job retention bonus scheme as the furlough scheme comes to an end in October. So from paying employees to stay at home, the government now switches to paying employers to take staff back; however, with many businesses on a cliff edge, it’s not that clear how this will materially help them. Stamp duty has been cut (temporarily) on house purchases, and this is boosting UK housebuilders today. VAT cuts in tourism and hospitality sectors are an obvious giveaway today, as the businesses accounting for 5% of GDP have been hit the hardest by the viral outbreak. The total cost of the announcements today sum up to GBP 30 billion, according to the treasury estimates, helping push the budget deficit to the highest level since WW2 – near 14% of GDP. That said, it’s difficult to tell whether this will unleash a new wave of consumer optimism; it seems to be more emergency measures targeted to some specific sectors rather than broader policy largesse. Never have the Tory party been so profligate with the purse strings. There is little wonder, in our view, the Labour party response was so neutered.

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