Dr Elaine Garcia, Senior Programme Leader at London School of Business and Finance (LSBF) comments on the recent economic measures announcement made by Chancellor Rishi Sunak to help reverse the damage caused by COVID-19
The announcements recently made by Chancellor Rishi Sunak represents a clear message that the Government is seeking to help reverse the decline in the economy we have seen in the last few months as a result of the lockdown and global pandemic.
Hospitality and tourism
The main focus for the Chancellor seems to be on the hospitality and tourism sectors which have been hit extremely hard by this crisis. The measures put in place such as a reduction on VAT to 5% and ‘eat out to help out’ vouchers are just two of the initiatives which are seeking to boost these sectors and encourage people to start spending their money and time outside of home. What is perhaps unclear, however, is whether this will be a sufficient incentive to encourage people to start to return to restaurants, hotels and leisure attractions when the virus is still in general circulation.
Another key element of the Chancellor’s measures focused on seeking to drive the housing market. The suspension of stamp duty may be welcomed, however, it is unclear whether this will be sufficient to encourage those who were not already planning to move home to do so. It is also unlikely that first-time buyers, who already faced lower stamp duty costs, will see any benefit as a result of this policy. The policy will only apply to main residences excluding those looking for second homes or buy to let properties.
The fact that this scheme runs until March 2021 may not leave enough time to allow an impact to be felt. Several factors need to be considered, such as the average house sales taking around four months, the time needed to find the right property and the need for the existing property to be sold. Whether this measure will, therefore, be sufficient to encourage people to invest in property during what is expected to be a severe recession remains questionable.
Further schemes introduced by the Chancellor promise a £1,000 to businesses who retain staff who have been furloughed and remain employed until January 2021 and additional funding for training for 16 to 24-year olds. Once again, questions remain regarding whether these will represent sufficient incentives in order for businesses to continue to keep staff employed or whether they will simply reward those businesses which were planning to keep staff employed anyway.
Within the range of measures indicated today, there appears to be little relief for those who may have recently been made redundant or whose business has been forced to close. For those already in this position, there appears to be little positive news at present.
Whilst these packages include large amounts of funding and seek to revitalise some sectors of the economy, it is still too early to determine the long-term impact this crisis will have on the economy and the degree to which recovery will be as swift as the government had hoped. For now, at least it appears the impact of the recession is likely to be felt for some time and recovery will be a slow and difficult process, despite the government’s interventions.