Bank of England policymakers are expected to inject up to £100bn into the economy when they meet this week amid mounting fears that the four-week lockdown for England will lead to a double-dip recession.
Threadneedle Street’s nine-strong monetary policy committee (MPC) will spend the next few days weighing up the impact of the renewed closure of large chunks of the economy before announcing its latest decisions on Thursday.
The MPC was already poised to announce gloomier economic forecasts even before the prime minister announced the drastic tightening of restrictions, and fresh action to support economic activity is now seen by the financial markets as inevitable.
The economy shrank by 20% in April – the most severe month of the first lockdown – and one leading analyst predicted that it could contract by up to a further 10% as a result of the curbs coming into force later this week.
Gerard Lyons, economic adviser to Boris Johnson when he was London mayor, said: “The economy will contract and while not by as much as it did in the initial lockdown, it will still be significant, possibly as much as 7.5-10%.
Quick GuideUK retail and hospitality job cuts on back of Covid-19 crisis
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Marston's - 2,150 jobs
15 October: Marston's - the brewer which owns nearly 1,400 pubs, restaurants, cocktail bars and hotels across the UK - said it would cut 2,150 jobs due to fresh Covid restrictions. The company has more than 14,000 employees.
Whitbread - 6,000 jobs
22 September: Whitbread, which owns the Premier Inn, Beefeater and Brewers Fayre chains, said it would cut 6,000 jobs at its hotels and restaurants, almost one in five of its workforce
Pizza Express – 1,100 jobs
7 September: The restaurant chain confirms the closure of 73 restaurants as part of a rescue restructure deal.
Costa Coffee – 1,650 jobs
3 September: The company, which was bought by Coca-Cola two years ago, is cutting up to 1,650 jobs in its cafes, more than one in 10 of its workforce. The assistant store manager role will go across all shops.
Pret a Manger – 2,890 jobs
27 August: The majority of the cuts are focused on the sandwich chain's shop workers, but 90 roles will be lost in its support centre teams. The cuts include the 1,000 job losses announced on 6 July.
Marks & Spencer – 7,000 jobs
18 August: Food, clothing and homewares retailer cuts jobs in central support centre, regional management and stores.
M&Co – 400 jobs
5 August: M&Co, the Renfrewshire-based clothing retailer, formerly known as Mackays, will close 47 of 215 stores.
WH Smith – 1,500 jobs
5 August: The chain, which sells products ranging from sandwiches to stationery, will cut jobs mainly in UK railway stations and airports.
Dixons Carphone – 800 jobs
4 August: Electronics retailer Dixons Carphone is cutting 800 managers in its stores as it continues to reduce costs.
DW Sports – 1,700 jobs at risk
3 August: DW Sports fell into administration, closing its retail website immediately and risking the closure of its 150 gyms and shops.
Marks & Spencer – 950 jobs
20 July: The high street stalwart cuts management jobs in stores as well as head office roles related to property and store operations.
Ted Baker – 500 jobs
19 July: About 200 roles to go at the fashion retailer’s London headquarters, the Ugly Brown Building, and the remainder at stores.
Azzurri – 1,200 jobs
17 July: The owner of the Ask Italian and Zizzi pizza chains closes 75 restaurants and makes its Pod lunch business delivery only
Burberry – 500 jobs worldwide
15 July: Total includes 150 posts in UK head offices as luxury brand tries to slash costs by £55m after a slump in sales during the pandemic.
Boots – 4,000 jobs
9 July: Boots is cutting 4,000 jobs – or 7% of its workforce – by closing 48 opticians outlets and reducing staff at its head office in Nottingham as well as some management and customer service roles in stores.
John Lewis – 1,300 jobs
9 July: John Lewis announced that it is planning to permanently close eight of its 50 stores, including full department stores in Birmingham and Watford, with the likely loss of 1,300 jobs.
Celtic Manor – 450 jobs
9 July: Bosses at the Celtic Collection in Newport, which staged golf's Ryder Cup in 2010 and the 2014 Nato Conference, said 450 of its 995 workers will lose their jobs.
Pret a Manger – 1,000 jobs
6 July: Pret a Manger is to permanently close 30 branches and could cut at least 1,000 jobs after suffering “significant operating losses” as a result of the Covid-19 lockdown
Casual Dining Group – 1,900 jobs
2 July: The owner of the Bella Italia, Café Rouge and Las Iguanas restaurant chains collapsed into administration, with the immediate loss of 1,900 jobs. The company said multiple offers were on the table for parts of the business but buyers did not want to acquire all the existing sites and 91 of its 250 outlets would remain permanently closed.
Arcadia – 500 jobs
1 July: Arcadia, Sir Philip Green’s troubled fashion group – which owns Topshop, Miss Selfridge, Dorothy Perkins, Burton, Evans and Wallis – said in July 500 head office jobs out of 2,500 would go in the coming weeks.
SSP Group – 5,000 jobs
1 July: The owner of Upper Crust and Caffè Ritazza is to axe 5,000 jobs, about half of its workforce, with cuts at its head office and across its UK operations after the pandemic stalled domestic and international travel.
Harrods – 700 jobs
1 July: The department store group is cutting one in seven of its 4,800 employees because of the “ongoing impacts” of the pandemic.
Harveys – 240 jobs
30 June: Administrators made 240 redundancies at the furniture chain Harveys, with more than 1,300 jobs at risk if a buyer cannot be found.
TM Lewin – 600 jobs
30 June: Shirtmaker TM Lewin closed all 66 of its outlets permanently, with the loss of about 600 jobs.
Monsoon Accessorize – 545 jobs
11 June: The fashion brands were bought out of administration by their founder, Peter Simon, in June, in a deal in which 35 stores closed permanently and 545 jobs were lost.
Mulberry – 470 jobs
8 June: The luxury fashion and accessories brand is to cut 25% of its global workforce and has started a consultation with the 470 staff at risk.
The Restaurant Group – 3,000 jobs
3 June: The owner of dining chains such as Wagamama and Frankie & Benny’s has closed most branches of Chiquito and all 11 of its Food & Fuel pubs, with another 120 restaurants to close permanently. Total job losses could reach 3,000.
Clarks – 900 jobs
21 May: Clarks plans to cut 900 office jobs worldwide as it grapples with the growth of online shoe shopping as well as the pandemic.
Oasis and Warehouse – 1,800 jobs
30 April: The fashion brands were bought out of administration by the restructuring firm Hilco in April, with all of their stores permanently closed and 1,800 jobs lost.
Cath Kidston – 900 jobs
21 April: More than 900 jobs were cut immediately at the retro retail label Cath Kidston after the company said it was permanently closing all 60 of its UK stores.
Debenhams – 4,000 jobs
9 April: At least 4,000 jobs will be lost at Debenhams in its head office and closed stores after its collapse into administration in April, for the second time in a year.
Laura Ashley – 2,700 jobs
17 March: Laura Ashley collapsed into administration, with 2,700 job losses, and said rescue talks had been thwarted by the pandemic.
“I expect unemployment to rise from 1.52 million to 3 million and large swathes of firms to be left nursing debt that will inhibit their ability to recover.”
Paul Dales, chief UK economist at Capital Economics, said he had been expecting UK GDP to move sideways in November but was now expecting a monthly fall of 5%.
“The economy is likely to show zero growth or even have a small decline in the fourth quarter of the year,” Dales said. “This has all the signs of a double-dip recession.”
The City is braced for a marked sell-off in the share of retail and hospitality companies – the two sectors hardest hit by the curbs on activity – when trading resumes on Monday.
Reports of the government’s U-turn on a lockdown came after the financial markets closed on Friday following a week in which the FTSE 100 Index dropped by almost 5%.
It is thought unlikely that the Bank’s MPC will reduce interest rates – already at just 0.1% – but instead rely on the money creation programme known as quantitative easing (QE) to boost lending and combat the imminent contraction of the economy.
With high street sales falling and consumer confidence sliding backwards in recent weeks, City analysts already believed the MPC was likely to increase QE from its current level of £745bn when it meets on Thursday.
Quantitative easing is a form of electronic money, created by the Bank of England and used to purchase UK government bonds, mainly from financial institutions. The Bank owns almost half of the UK government’s debts.
The effect is to depress long-term borrowing costs and encourage banks to lend to commercial businesses.
The Bank policymakers, who have increased the central bank’s QE programme by £300bn since March, are also likely to be concerned about ongoing Brexit talks, which have hit investment and could cause severe disruption to EU/UK trade if negotiators fail to agree a deal.
The Bank’s chief economist, Andy Haldane, has stressed in recent speeches that the UK economy rebounded quickly from the first lockdown although several of his colleagues, noticeably the academic Silvana Tenreyro and former hedge fund economist Gertjan Vlieghe, have highlighted the UK’s weak growth rate.
Martin Beck, senior UK economist at the consultancy Oxford Economics, said an additional injection of QE could “boost sentiment” in financial markets and among businesses and consumers.
“It would also help guard against any unwarranted rise in government borrowing costs were market turmoil to return.”
US Federal Reserve policymakers will also meet next week, though they are not expected to discuss a shift in policy during the final few hours of the presidential election campaign.