Market Loop - 💸£1bn support for Covid hit firms

ECONOMY
£1bn support for Covid hit firms 

What’s going on?
Yesterday the government announced a new £1bn rescue package to help industries worst hit by the recent Omicron-related downturn in economic activity.

Why is this important?

The discovery of the Omicron variant of Covid-19 kicked into gear the government’s “Plan B” which includes the return of work from home guidance and mandatory face coverings in indoor venues.

With the possibility of more restrictions looming, pubs, restaurants and venues have seen a raft of pre-Christmas event cancellations and a slowdown in trade as people stay home. 

December is a crucial month for the hospitality sector, in a normal year 25% of annual profits would be taken in this month alone. 

After weeks of pressure from the hospitality industry, the Chancellor has finally succumbed to calls to support Covid impacted businesses. £1bn of funding has been allocated to the following areas:

Takeaway
Plan B, growing Covid cases and fears of Omicron have arguably been almost as damaging as a full-blown lockdown forcing the government into action.

Although the hospitality sector has welcomed the new funding, the question remains what happens if even more restrictions are introduced.

But before any more support can be announced the Chancellor will need to consider the already weak public finance position. Government borrowing has ballooned to cope deal with Covid and national debt is at its highest level since the 1960s.

ENERGY
Energy bills could rise by over 50%

The Christmas song goes “Baby it’s cold outside” but with soaring energy prices it may also be cold inside many homes this winter.

European gas and electricity prices – already up x5 this year – have risen to new highs this week driven by a drop in temperatures, raising demand, and lower supplies from Russia and France.

It comes as industry experts predicted that energy bills for UK households could jump by over 50% to £2,000 a year from April.

The energy regulator sets a price cap twice a year based on wholesale prices, it’s currently at its highest level of £1,277 but will be reset next Spring undoubtedly to a new record. 

Dozens of energy providers have gone bust in recent months, impacting 4m customers, as they’ve been unable to deal with the unprecedented spike in prices. 

The government and the regulator are facing pressure to do more to protect household finances. But not all causes of the situation are controllable. For instance, 2021 has been a bad year for wind power and a longer and colder than usual winter last year ran down gas supplies. 

The UK also has lower levels of gas reserves compared to the rest of Europe making it more vulnerable global gas prices.