Gordon Brown warned hundreds of British companies are likely to go under in the coming months due to banks requiring owners to pay back emergency loans taken out during the coronavirus lockdown. The former Prime Minister urged Boris Johnson to create a new watchdog focused on ensuring pressure for repayment does not force businesses to shut down. Speaking to ITV’s Peston, Mr Brown said: “The next few months, the banks will bring down large numbers of companies because they will not be able to keep them in finance.
“Inland revenue may do it but the banks will probably do it.
“Unless we have another group of people advising on how, sector by sector, we can keep businesses in being, then I’m afraid that the Treasury will enforce upon the banks rules saying, ‘you’ve got to recover all the money that’s been loaned.’
“Remember, we’ve been loaning people money and that money has to be paid back.”
Mr Brown continued: “In 2009-10, we kept unemployment low. We stopped business bankruptcies and we stopped mortgage repossessions that we’d seen in previous recessions.
“And we were far more successful than the rest of Europe, where unemployment ran at about 10 percent.
“The Government has a responsibility here, whether it is a private activity or limited, it’s got to play a part in creating activity.”
The warning comes as the Bank of England’s Monetary Policy Committee (MPC) voted unanimously to hold rates for the time being.
In a statement following the vote, the BoE said: “The spread of COVID-19 and the measures to contain it are having a significant impact on the United Kingdom and many countries around the world.
The forecasts also project a swift recovery of the economy once the country begins to ease restrictions.
The IMF has recommended the UK take advantage of the low rates, as low private investment levels mean the state is unlikely to “crowd out” any other profitable spending by soaking up cash or workers required for businesses’ needs.
The international organisation recommended that this should include transport infrastructure and green energy projects.
Due to the planning and the time to launch new schemes, governments across the world have been advised to plan to immediately start work when the pandemic allows.
The IMF says in the latest chapter of its Fiscal Monitor: “To reduce implementation lags and guide expectations, policymakers should act swiftly to establish a pipeline of appraised investment projects now that can be implemented when the health crisis abates, and plan discretionary measures that can be deployed quickly.”
Published at Thu, 07 May 2020 07:32:00 +0000