The Bank of England has cut interest rates by 50 basis points to 0.25% as it anticipates "an economic shock that could prove sharp and large, but should be temporary." The Monetary Policy Committee (MPC) voted unanimously for the emergency cut and other measures in a package to support the economy. It includes the introduction of a new Term Funding Scheme with incentives for small and medium-sized businesses. The Financial Policy Committee (FPC) has also removed the countercyclical capital buffer for banks for at least a year.
Newly-appointed Chancellor of the Exchequer (finance minister) Rishi Sunak will also deliver the government's first budget today. The Treasury has already promised it will spend over £600 billion on infrastructure over five years, a claim not everyone believes, but the focus today will be on financial help related to the COVID-19 crisis.
The U.K., steadying itself after years of political turmoil and looking at building trade ties, is now confronting the coronavirus outbreak. There have been over 380 confirmed cases in the country, including Health Minister Nadine Dorries who was diagnosed hours ago. The virus that has shutdown neighboring Italy and spread to thousands in France, Germany and Spain, has claimed the lives of six people in Britain and the government faces calls for stricter measures.
The ambitious Brexit timetable hasn't been changed despite calls for an extension. The transition period will end in December, after which the U.K. will leave the bloc's single market and customs union. Boris Johnson has said he wants a Canada-style comprehensive free trade agreement with the EU. The EU and Canada negotiated seven years on that deal before it came into force, and it still hasn't been signed by some members of the bloc. Next week a second round of talks will begin in London.
U.K. GDP remained flat in the three months to January, following no growth in Q4 2019 (Oct to Dec). "Growth in construction, driven by housebuilding, offset yet another decline in manufacturing, particularly the drinks, cars and machinery industries," said Head of GDP at ONS, Rob Kent-Smith. "The dominant services sector also showed no growth in the latest three months with falls in retail and telecoms balanced by strength in rentals, employment and education."