Coronavirus: UK on war footing as confirmed cases near 2,000

Finance minister Rishi Sunak says the country is facing an unprecedented 'economic fight' as sterling hits six-month low

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Britain's finance minister on Tuesday set out a £330 billion (Dh1.4 trillion) package of guarantees to support businesses and said the government will do "whatever it takes" to protect the UK economy from the impact of the coronavirus pandemic.

Mr Sunak also announced the creation of a £20 billion direct package, while homeowners will be able to access a three-month mortgage payment holiday.

The announcement followed US President Donald Trump's request for Congress to free up economic aid to help people through the growing crisis, with sizeable checks paid directly to Americans a part of the deal.
The UK government has advised people to avoid social gatherings and work from home where possible, putting some companies on the verge of collapse.

The chancellor also unveiled measures to help support airlines and airports, as well as cash grants and an extension of the business rate holiday to the hospitality and leisure sector.

"We have never faced an economic fight like this one," Mr Sunak said.

The chancellor also said the country's health service would be given "whatever resources it needs".

“We must act like any wartime government and do whatever it takes to support our economy,” British Prime Minister Boris Johnson told reporters at a press conference in London on Wednesday.

"This is a disease that is so dangerous and so infectious that without drastic measures to check its progress it would overwhelm any health system in the world," he added.

Britain's Chancellor of the Exchequer Rishi Sunak walks at Downing Street in London, Britain March 16, 2020. REUTERS/Henry Nicholls

Mr Johnson earlier told ministers the country was “engaged in a war” against the pandemic as the number of cases in the UK neared 2,000 on Tuesday after 407 more people were confirmed to have the virus across the country.

“The PM said we are engaged in a war against the disease which we have to win,” a spokesperson for the prime minister’s office said.

“He added that government must rise to the challenge of supporting businesses through what will be hugely challenging times, and further details will be set out shortly.”

Mr Johnson’s comments came as the head of the Treasury watchdog urged ministers to raise public spending.

Office for Budgetary Responsibility chief Robert Chote told MPs on the Treasury committee not to be “squeamish about one-off additions to the public debt”.

He added that what Britain was facing was “more like a wartime situation” and said public money would be “well spent” on the crisis.

Billionaire British businessman John Caudwell on Tuesday said the outbreak could cost the economy “hundreds of billions of pounds, maybe trillions.

“Without help, millions of people will be out of work,” he told BBC Radio 4’s Today programme.

British companies have already been hit hard by the latest crisis.

The world’s biggest catering firm, Compass Group, warned on Tuesday that its half-yearly operating profit would be lower than expected after European and North American governments and businesses sought to contain the spread of the virus.

New Bank of England Governor Andrew Bailey promised more “prompt action” by the central bank on Monday, less than a week after an emergency rate cut by the BoE as the scale of the coronavirus hit to the economy became clearer.

Investors are watching out for another rate cut, possibly before the BoE’s next scheduled announcement on March 26, even though its room for manoeuvre has been reduced by last week’s action when its benchmark lending rate was cut to 0.25 per cent.

The central bank is also expected to expand its £435 billion government bond-buying programme.

“We expect more easing on the monetary and fiscal fronts,” JP Morgan economist Allan Monks said. “These actions will cushion the economic hit rather than meaningfully offset it.”

Sterling dropped to its lowest level against the US dollar since early September on Tuesday.

The pound has been in retreat as fears about the economic impact of the pandemic have roiled global markets and sent investors fleeing to assets seen as relative safe havens, including the dollar.

Analysts say sterling is also vulnerable given Britain’s high current account deficit.

The pound fell as much as 0.6 per cent to $1.2192 on Tuesday . Against the euro it edged up 0.2 per cent to 91.06 pence per euro, but was still trading near the previous day's six-month low of 89.89 pence.

French President Emmanuel Macron said on Monday that his government would guarantee €300 billion worth of loans, and promised that no French company of any size would be allowed to collapse.

Britain has £1.8 trillion of public-sector debt, equivalent to about 80 per cent of GDP, a figure that is lower than many other advanced economies. But debt can rise sharply during downturns. Before the 2008 financial crisis, the debt burden stood at 34 per cent.

The increase in debt largely reflected the long-lasting economic slowdown and reduced tax revenue.

Britain spent about £137 billion to provide support to banks during the crisis, but most of this cost was recouped and the longer-term net direct cost was closer to £27 billion. There were also £1 trillion of loan guarantees.