Analysts and industry insiders have been weighing up the radical measures being taken to try and shore up the economy during the greatest period of social upheaval since the Second World War.
Questions have been raised about whether Chancellor Rishi Sunak’s plans for an “unprecedented” £330 billion loan package for businesses goes far enough as huge chunks of industry grind to a halt.
Stockbroker AJ Bell said business needs debt relief right now rather than more debt.
It also warns of the consequences of the drop in production that could be around the corner.
Elsewhere though, the Federation of Small Businesses, applauded the loan pledge and Chancellor’s promise to do “everything necessary” to help businesses, including the moratorium on business rates for businesses in the retail, leisure or hospitality sectors.
Chambers of Commerce, meanwhile, said the roll out of support – including cash grants for SMEs – needs to be done efficiently and without delay.
Kevin Doran, chief investment officer at AJ Bell, had reservations about the measures being taken to contain the impact of the coronavirus on the economy – equal to around 15 per cent of GDP. But he warned: “What’s missing is any real help to fill in the production chasm that is coming our way over the next few months.
“If this is ‘whatever it takes’, I’m afraid ‘it just isn’t enough’.
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“For the regular man on the street, the headline grabber will be the 3-month payment holiday on mortgages.
“Whether the banks will continue to accrue interest on the outstanding balances isn’t clear yet.
“If it’s a simple payment holiday, then that’s pretty much what any bank would offer all customers in payment difficulty – nothing new here.
“If it’s debt relief, then that’s different and represents quite a hand-out to the public given that there’s £1.3 trillion of mortgage debt in the market earning the banks an estimated £6.5 billion of interest every quarter.
“For businesses, there’s the offer of tax breaks, grants and access to £330 billion of low-cost loans with a 6 month interest free period.
“Again, there’s a need to see details here, but it’s best thought of as giving interest free loans to corporates to cover cash flow issues during the lock-down.
“What’s most interesting here is the setting up of a lending business within the Bank of England itself in the form of the Covid Corporate Financing Facility (CCFF), which will see the Central bank not just take on private debt to its balance sheet (which it did a bit of in 2008/09) but actually originate the loan itself direct with the business issuing the commercial paper.
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“Interesting, but again a cash flow tool, not one that replaces lost production.
He said the smart thing to do would be to give genuine debt relief to both businesses and households, with interest written off on debts for the entire six month period.
He said: “By our calculations, the total interest received by the banks on their loan books amounts to around £28 billion per quarter.
“Wiping out the interest on those loans for six months would shave £56 billion or so from the bank’s profit and loss and tip the entire sector into the red for the year, but would amount to only 3 per cent of all loans outstanding and a touch over 12 per cent of the bank’s risk capital.
“As a percentage of GDP, it’s a giveaway of around 3 per cent, which, whilst we’re at it, we should top up with Government support for the 5 million people who pay rent instead of mortgages in the 海角视频.”
Federation of Small Businesses National Chairman Mike Cherry said it was a clear, and “hugely important” intervention from the Government, and it was reassuring that the Chancellor was pledging to do more in the days ahead.
He said: “Small firms are having their futures threatened in the here and now. They need support in the here and now.
“The key now is to deliver these measures within the coming days with no hold ups at banks, local authorities or central government.
“Some small businesses are already on the brink – they need time and space from landlords, HMRC and lenders over the next few days before these interventions take effect.
Scott Knowles, chief executive at East Midlands Chamber of Commerce, said in unprecedented times the Chancellors actions were an unprecedented – and welcomed – intervention.
He said: “Businesses are experiencing challenges right now and it is absolutely critical that the roll out of these measures is conducted efficiently and without delay to ensure that both employers and employees can be reassured in what are uncertain and challenging times.
“It will become evident shortly whether the measures are sufficient to provide essential aid to businesses at this critical time.”