U.K. Government Preparing Stimulus Package for July, FT Says

(Bloomberg) -- The U.K. government is preparing to unveil an economic stimulus package in July as it steps up attempts to lessen the depth of the recession caused by the coronavirus pandemic, the Financial Times reported, citing unidentified government officials.

Chancellor of the Exchequer Rishi Sunak is working on proposals to invest in training programs, infrastructure and help for technology firms, it said. He will also make a major speech in June to encourage people back to work as the shuttering of businesses to stem the transmission of the virus leads to a surge in unemployment.

Sunak on Friday refused to say if he would hold an emergency budget this summer, but officials told the FT that plans were being developed for a “fiscal event” in July.

A Treasury spokesman told Bloomberg that “we announce events like this in the usual way and we are not doing that now.” One government official said work was under way on further steps to support the economy but described weekend reports on the content of any package as speculation.

Sunak has warned the U.K. is facing a significant recession, with the Bank of England foreseeing a 25% contraction this quarter as part of the deepest slump in more than three centuries. The Treasury on Friday announced an incremental tapering of its job support program in a bid to avert a mass wave of unemployment.

U.K. banks are warning that up to half of the 18.5 billion pounds ($23 billion) accessed by small firms via the government's “bounce back” loan program are unlikely to be repaid, the FT said, citing three unidentified senior bankers. While the loans are 100% guaranteed by the state to spare banks from credit risk, they have been told to use their normal approach to collections, meaning hundred of thousands of businesses could collapse.