The UK Chancellor Rishi Sunak delivered his summer economic update to Parliament today (8 July 2020). We were hoping for some key infrastructure announcements, but the detail was lacking.

The Chancellor began by outlining the challenge: the IMF is expecting the deepest global recession since records began. The UK economy contracted by 25% in two months, the amount it had grown by over the last 18 years.

He then explained that we are in the second phase of COVID-19 recovery. The first, beginning in March, was "protection"; this second phase is "jobs" and the third phase (which seems to begin with the budget and spending review in autumn) will be "rebuild". The third phase is when we may see more detail on infrastructure.

For now, the Chancellor concentrated on his "Plan for Jobs" – to protect, support and create jobs. It is in three parts.

1. Young people (Supporting Jobs)

The Chancellor confirmed that the furlough scheme would wind down flexibly and gradually until October, but he announced a new Jobs Retention Bonus for employers who bring back furloughed employees and keep them continuously employed until January 2021 at an average wage of at least £520 per month between November 2020 and January 2021. The bonus will be £1000 per employee.

There will be a Kickstart Scheme for young people, funding a six-month job placement with a minimum of 25 hours a week. The funding will pay the minimum wage for six months plus an amount to cover overheads. Applications start next month for an initial £2 billion fund. There is no cap on the number of places available.

For next 6 months, businesses will be paid £2000 for each new apprentice, with a new bonus of £1500 for apprentices aged 25 years or over.

There will be more money for the DWP for job centres.

2. Greening our infrastructure (Creating Jobs)

The Chancellor wants "a green recovery with concern for our environment at its heart." He announced (as had been trailed in the press) a £2 billion Green Homes Grant allowing homeowners to apply for vouchers from September covering at least 2/3 of the cost of energy efficiency measures up to £5000 per household, or the full cost up to £10,000 for low income households.

He also announced £1 billion funding to improve the energy efficiency of public sector buildings plus a £50m fund to pilot the right approach to decarbonise social housing.

Finally, with property transactions falling 50% in May and house prices falling for the first time in eight years, he is cutting stamp duty by raising the threshold from £125,000 to £500,000 until 31 March 2021, taking effect immediately.

3. Hospitality and leisure (Protecting Jobs)

Finally, he turned to the hospitality and tourism industry which employs over £2m people – a disproportionate amount of younger people, women, BAME, rural and coastal communities. It has had the most people on furlough of any sector. 

For the next six months starting next Wednesday (15 July), he is cutting VAT on food, accommodation and attractions from 20% to 5% - a £4 billion catalyst protecting 2.4 million jobs.

Also, in a first of its kind scheme, for August, everyone in the country will get an "eat out to help out" discount:  50% off meals Monday-Wednesday up to maximum £10 a head.

Comment

We were hoping for some more concrete announcements around greening our infrastructure, but hopefully there will be more detail later in the year. For now, it's clear that the Chancellor was concentrating on jobs and looking at the short to medium term as he tries to get the economy back on its feet. The press release issued after the speech reiterated the Prime Minister's "Build Build Build" commitments last week that £5.8 billion will be spent on shovel-ready construction projects including hospitals, roads, schools and courts.

The emphasis in the speech on "green jobs" is an encouraging sign that the Government is looking for a green recovery from the pandemic: something that is needed if the UK is to meet its net zero carbon emissions target in 30 years' time.

Full speech here > 

Press release here >