Coronavirus: Chancellor announces £330bn in government-backed loans to help businesses

Rishi Sunak also offers an additional £20bn in tax cuts and grants over the course of this year

Chancellor Rishi Sunak has unleashed the biggest package of emergency state support for business since the 2008 financial crash, unveiling £330bn worth of government-backed loans and more than £20bn in tax cuts and grants for companies threatened with collapse because of the coronavirus crisis.

Mr Sunak also said that he was ready to extend the lending capacity to an “unlimited” level in order to help companies including pubs, clubs and shops facing financial meltdown caused by the extraordinary lockdown measures announced by prime minister Boris Johnson on Monday. And he announced a three-month mortgage holiday for homeowners in difficulties because of the outbreak.

But economic thinktank the Institute for Fiscal Studies warned that the chancellor – in the job for only one month – “will need to come back with more”, as firms could otherwise become financially unviable when the loans come up for repayment.

The massive cash injection – on top of a £30bn economic stimulus in last week’s budget – came as the government released emergency legislation allowing police to detain individuals thought to be infected with the virus and enabling the government to shut down ports and airports and seize vehicles.

Earlier, chief scientific adviser Sir Patrick Vallance warned that as many as 55,000 people in the UK may now be infected and said it would be a “good outcome” if the eventual death toll could be kept below 20,000.

Standing alongside Mr Johnson in the second daily coronavirus press conference at No 10, Mr Sunak said: “This is not a time for ideology and orthodoxy. This is the time to be bold, a time for courage. I want to reassure every British citizen – this government will give you all the tools you need to get through this.

“We will support jobs. We will support incomes, we will support businesses, and we will help you protect your loved ones. We will do whatever it takes.

Mr Sunak also said mortgage lenders had agreed a scheme so that “people will not have to pay a penny towards their mortgage costs before they get back on their feet”.

He promised to work with trade unions and business groups over the coming days to urgently develop new forms of employment support to help protect people’s jobs and their incomes.

Mr Johnson acknowledged that the government’s call for Britons to stay home and avoid contact with other people was “unprecedented since World War Two”.

And he tried to present himself as the leader of a nation at war, saying: “We must act like any wartime government, and do whatever It takes to support our economy.

“Yes, this enemy can be deadly, but it is also beatable.

“And we know how to beat it and we know that if as a country we follow the scientific advice that is now being given, we know that we will beat it.

“However tough the months ahead, we have the resolve and the resources to win the fight.

“And to repeat, this government will do whatever it takes.”

The repeated use of the phrase “whatever it takes” seemed a deliberate echo of former European Central Bank chief Mario Draghi, intended to reassure panicking markets in the same way his 2012 promise to protect the euro did during the eurozone crisis.

The PM appeared to hint that he may give in to pressure to order schools to close, saying the position was “under continuous review”.

Asked what he would do about pupils on free meals if schools were closed, the PM said: “As we come to the decision on schools, we will have plans ready to go on that. Gavin Williamson, the education secretary, has a plan to make sure that parents with kids who are eligible for free schools meals get the compensation or the treatment they need one way or the other. We have certainly anticipated that.”

Mr Sunak said that the guaranteed loans equated to 15 per cent of UK GDP.

“That means any business who needs access to cash to pay their rent, their salaries, suppliers, or purchase stock will be able to access a government-backed loan or credit on attractive terms,” the chancellor said. “And if demand is greater than the initial £330bn I’m making available today, I will go further and provide as much capacity as required.

“I said whatever it takes, and I meant it.”

The support will be delivered through a new Bank of England lending facility and an extension to the business interruption scheme announced in the budget, which will now provide loans of up to £5m rather than £1.2m, interest-free for six months.

He announced cash grants of up to £25,000 for retail, hospitality and leisure businesses with a rateable value below £51,000, to help them through a period when customers have been advised not to attend pubs and clubs.

A year-long business rates holiday will be extended to all companies in these sectors, said the chancellor.

And he assured businesses that the government’s action will allow them to make claims against insurance policies covering pandemic losses.

Cash grants of £3,000 for the smallest businesses, announced in the budget, are to be increased to £10,000.

Mr Sunak said he was discussing with transport secretary Grant Shapps a potential support package specifically for airlines and airports, which are suffering from a collapse in passenger numbers.

IFS director Paul Johnson said that, while “substantial”, the cash support for businesses announced by the chancellor “is probably not well targeted at saving jobs”, as it will remain expensive for retail, leisure and hospitality businesses to keep staff on.

A package to support employment might include cuts to employer national insurance contributions, a delay in increases to the national living wage and increased support for individuals through universal credit, as well as help for workers to move temporarily to jobs now in high demand, like delivery drivers and warehouse workers, he suggested.

British Chambers of Commerce director general Adam Marshall said: “Businesses will welcome the scale of the government’s latest response, as well as the specific support it is offering to some of the worst-affected parts of our economy. These measures could be a lifeline for many businesses across the UK who are now experiencing wholesale disruption as a result of the pandemic.”

But he warned: “Further measures will be needed to help all firms and their employees meet this unprecedented challenge.”

Labour leader Jeremy Corbyn said: “The government has announced a mortgage holiday for homeowners but it must suspend rents too. Millions of people rent in the UK. Suspend rents. Ban evictions. Now.”

TUC general secretary Frances O’Grady said: “The chancellor is right to provide emergency support for business. But this can’t be just a bailout for boardrooms. It has to put money in workers’ pockets too.”