The government’s coronavirus Budget is sensible – but it’s bad news for small businesses

The government and the Bank of England do at least have a clever, coordinated plan for the economy in general. But whether it actually will work for certain enterprises remains to be seen, writes Hamish McRae

Rishi Sunak poses with the Budget Box ahead of the government’s announcement (AFP)

Finance in Britain is now on a war footing. Expect other countries to do the same. The cut in interest rates and the other emergency measures to support the economy announced by the Bank of England are part of the UK’s plan to combat the economic impact of the coronavirus epidemic. But they are also part of a global drive to give the world economy a monetary boost, and they give some clues as to how the rest of the developed world will act in the days ahead.

The US Federal Reserve has already cut interest rates and is expected to do so again later this month. The European Central Bank meets on Thursday and will announce both some kind of monetary easing including more of the ECB’s version of quantitative easing (QE). But it is clear that cuts in already very low interest rates are not that effective.

In Europe, where official rates are negative, the impact is likely to be minimal. What matters to businesses is not the price of money but rather its availability. So the bank’s plan to establish a term funding scheme for small businesses is an essential element in the package. The other elements of lending support from the government, especially the partial guarantees for emergency loans, are almost certainly more important than the cut in interest rates.