The Bank of England has cut interest rates in an emergency move to support the economy in the wake of the coronavirus outbreak ahead of today’s Budget statement.
It followed an unscheduled meeting of the monetary policy committee which voted unanimously to slash the rate from 0.75 per cent to 0.25 per cent.
The FTSE 100 index rose by one per cent as traders reacted to the move. Mortgage lenders were expected to follow suit by cutting the costs of monthly mortgage bills.
The central bank has also announced a new term funding scheme to support small and medium-sized companies and new steps to help commercial banks lend more.
Tej Parikh, Chief Economist at the Institute of Directors, said: “The Bank’s swift action to shore up confidence and support lending will come as a significant relief to business leaders.
“A rate cut will help to support confidence in the markets, which has taken a severe knock over the past few days. For businesses, the wider package of lending support could be just as crucial in the medium term, to help firms ride out the anticipated difficulties.
“Directors will now be looking to the Chancellor to match this support with fiscal measures to lower costs and coax business investment in the months ahead.”
Peter O’Connell, managing director of Shaw Gibbs, accountants said: “I’m not sure anyone was expecting the rate cut to be this drastic or likewise drawn up during an emergency meeting hours before the Budget.
Natwest has already said it will pledge £5bn of funding to help SMEs weather any disruption and Lloyds Banking Group is to make £2 billion available.
Barclays is offering business customers a package of measures including delaying repayments on existing loans over £25,000 for 12 months. and offering extended overdraft facilities.
Elsewhere, the effects of the crisis have been far-reaching and have led to a wide range of measures in all walks of life.
“It will certainly be very interesting to see how this will impact the Budget this afternoon. We think we’re likely to see the Chancellor announce more aggressive spending policies and fiscal measures as a result.”
Stock Market uncertainty has already prompted The Treasury to delay selling its 62 per cent stake in the Royal Bank of Scotland, probably until 2025. RBS is offering three-month mortgage holidays for customers affected by the outbreak.
Informa, the world’s biggest events company, , has postponed or cancelled almost 130 business-to-business events at a cost of more than £400m in revenue.
- JCB, the British digger maker, has cut working hours and suspended overtime for 4,000 UK employees after the coronavirus outbreak prompted a shortage in parts coming from China.
- Factory workerswill work a 34-hour week until the disruption ends, although they will still be paid for a 39-hour week and will work them back later in the year.
- The Australian airline Qantas is to cut its global capacity by a quarter over the next six months as it tries to offset the fall in passengers. It has also put an order for 12 Airbus A350-1000 planes on ice.
- The Norwegian airline SAS has told unions it is considering a 20 per cent work and pay cut for all its staff.
- Apple — the world’s most valuable tech company — said it is reducing its revenue targets this quarter in a rare company advisory released this week.
- Safestay, the hostel operator, has reported a sharp drop in bookings and a growing number of cancellations from schools and colleges.
- Former Tory leader candidate Rory Stewart has cancelled the launch of his London mayoral campaign, instead calling on the government to close all schools and cancel all large public gatherings.
- John Menzies is temporarily suspending its annual dividend after warning of an expected 2020 profit slump of £6m-£9m if the outbreak subsides towards the end of the second quarter.
- Apple — the world’s most valuable tech company — said it is reducing its revenue targets this quarter in a rare company advisory released on Monday.
- Restrictions on delivery hours for shops are to be relaxed to ensure shops remain stocked with basic items amid concerns over stockpiling. Defra has promised to work with local councils to increase the frequency of deliveries.