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UK extends Covid job subsidy scheme until end of April – leading macroeconomic influencers

18 Dec 2020 (Last Updated December 18th, 2020 10:59)

Economists believe that UK’s late announcement of previous extensions to the loan guarantee and job retention schemes have caused more people to lose their jobs.

UK extends Covid job subsidy scheme until end of April – leading macroeconomic influencers
As the Covid-19 outbreak continues, the UK Government has formulated an action plan to respond to various ways the epidemic could develop. Credit: Maurice via Wikimedia.

Economists believe that UK’s late announcement of previous extensions to the loan guarantee and job retention schemes have caused more people to lose their jobs. The Bank of England estimates Britain’s economy to have shrunk by 11% this year, the biggest fall ever.

Howard Archer

Howard Archer, chief economic advisor to the EY ITEM Club, a UK forecasting group, shared an article on the British finance minister Rishi Sunak’s announcement of extending the government’s coronavirus job subsidy scheme until the end of April. According to the minister, businesses will be able to procure Covid loans till the end of March 2021.

Sunak made the announcement as part of the long-term plans laid out in March, as he aims to cut down on public borrowings earmarked as $540bn. The UK has spent approximately $63bn to support nearly 10 million jobs since the start of the pandemic. It has also given banks guarantees on $91bn of lending to businesses who were losing their income due to the coronavirus crisis, the article detailed.

The loan guarantee scheme was due to end on January 31, while the job retention programme was due to end on March 31. Sunak has been heavily criticised for not announcing previous extensions on time, as some employers already laid off their staff.

David Wessel

David Wessel, a journalist and director of the Hutchins Centre on Fiscal and Monetary Policy, shared an article on how the Republican Party of the US wants to limit Federal emergency lending programmes as part of the year end Covid relief bill. Talks on the $900bn coronavirus could trickle onto the weekend, the article noted.

One of the most worrisome issues being discussed by the White House and Congressional leaders is how much power should rest with the Federal Reserve and what should be the structure of the new round of stimulus checks, the article detailed.

Economists believe that lawmakers should be able to pass at least a makeshift spending bill by Friday to avoid a government shutdown on Saturday, after which, they could continue negotiating the stimulus bill over the weekend.

One of the most contentious issues is to design the eligibility for the stimulus checks, and also over the Republicans demanding limits on the Federal Reserve and Treasury Department’s emergency lending programmes as part of the Covid relief bill. On the other hand, Democrats believe that such restrictions will coerce the ability of the new Biden administration to stabilise the economy during a prolonged downturn, the article highlighted.

Konstantina Beleli

Konstantina Beleli, an economist, shared an article on how most economists have forecasted the US labour market to cool off until the Covid vaccines are distributed. Jobless claims rose to 885,000 with layoffs remaining high in the previous week, indicative that the economy was entering a winter slowdown due to a rise in Covid infections and tighter restrictions on business activities, the article detailed.

Economists also found job claims to have dramatically fallen from a peak high of approximately 7 million in March, but to be gradually increasing as per the four-week moving average. However, weekly numbers were observed to be volatile around holidays and seasonal adjustments.

Many economists expect the labour market to cool until the distribution of vaccines, which will cause a spurt in business activities and job hiring in the second quarter of 2021. Although job claims declined in many US states last week, they continued to rise in some populous states such as California and Illinois, which are currently witnessing a rise in Covid cases and tighter restrictions, the article noted.