UK: Furlough for longer – Standard Chartered

The UK government has extended the furlough scheme, therefore, 2020 budget deficit is likely to hit 12.5% of GDP, economists at Standard Chartered Bank estimate.

Key quotes

“The furlough scheme could have a significant positive impact over the medium-term as it allows companies to retain most of their staff, while limiting bankruptcy risks associated with maintenance of employee costs.”

“Because of our weaker growth outlook, the extension of the furlough scheme and the more gradual exit from lockdown than previously assumed, we revise our 2020 fiscal deficit forecast to 12.5% of GDP (from 8.5% previously). We see it narrowing to 8.0% in 2021 (7.0% previously).” 

“The UK’s national debt stood at 81% of GDP in 2018/19 and is therefore likely to climb to around 100% of GDP by the end of next year.”