UK unveils $420 billion lifeline for firms hit by coronavirus

Britain's Prime Minister Boris Johnson, Chancellor of the Exchequer Rishi Sunak and Chief scientific officer Patrick Vallance arrive for a news conference on the ongoing situation with the coronavirus disease (COVID-19) in London, Britain March 17, 2020. (Reuters)
Updated 18 March 2020

UK unveils $420 billion lifeline for firms hit by coronavirus

LONDON: Britain said it would launch a £330 billion ($399 billion) lifeline of loan guarantees and provide a further £20 billion in tax cuts, grants and other help for businesses facing the risk of collapse from the spread of coronavirus.
Finance minister Rishi Sunak repeated his pledge to do “whatever it takes” including further action if needed to help sectors from retailers to bars and airports which are reeling from a near-shutdown of their businesses.
“This is not a time for ideology and orthodoxy,” Sunak said on Tuesday, speaking alongside Prime Minister Boris Johnson. “This is a time to be bold, a time for courage.”
Britain, criticized by some scientists for moving more slowly than other European countries to prevent the spread of the virus, ramped up its response on Monday when it told people to avoid pubs, clubs, restaurants, cinemas and theaters.
The coronavirus death toll in Britain rose by 16 to 71 on Tuesday.
Sunak said he was including all retail, hospitality and leisure businesses in the suspension of a property tax, alongside the new loan guarantee program which was equivalent to 15% of British economic output.
Companies from those sectors would be offered cash grants and the government would discuss a support package for airlines and airports.
Britain’s biggest airports including Heathrow and Gatwick have warned that they face the threat of a complete shutdown without government help.
Banks and lenders would offer a three-month mortgage holiday for people in difficulty, Sunak said.
He later told lawmakers, some of whom criticized the business focus of the plan, that the government would soon make a statement about support for renters.
Sunak described Tuesday’s package of measures as unprecedented, although Britain issued guarantees of around £1 trillion
during the global financial crisis.
The Institute for Fiscal Studies, a think-tank, said Sunak would need to “come back with more” and Allan Monks, a JP Morgan economist, said that excluding the loan guarantees, the size of Britain’s stimulus measures for this year was “likely to look small compared to the economic shock underway.”
The Bank of England said it would set up a new fund with the finance ministry to buy commercial debt with a term of up to one-year issued by investment-grade companies making a “material contribution” to Britain’s economy.
It added that the fund would be financed out of the creation of central bank reserves — in other words with new money, much like the BoE’s quantitative easing program.
Earlier on Tuesday, Britain’s budget forecasters said the scale of the borrowing needed to fight the coronavirus hit to the economy might resemble the country’s immense debt splurge during World War Two.
“Now is not a time to be squeamish about public sector debt,” Robert Chote, head of the Office for Budget Responsibility, told lawmakers.
“We ran during the Second World War budget deficits in excess of 20% of GDP five years on the trot and that was the right thing to do.”
On Monday, French President Emmanuel Macron said his government would guarantee 300 billion euros worth of loans, and promised that no French company would be allowed to collapse.
New Bank of England Governor Andrew Bailey promised “prompt action” on Monday, less than a week after an emergency rate cut by the BoE which took its benchmark rate to just 0.25%.
Investors are watching for another rate cut, possibly before the BoE’s next scheduled announcement on March 26.
The central bank is also expected to expand its £435 billion government bond buying program.


US ‘cloud’ supremacy has Europe worried about data

Updated 5 min 2 sec ago

US ‘cloud’ supremacy has Europe worried about data

  • Europe is sitting on a wealth of data that is the 21st century equivalent of a precious metal mine
  • Europeans may be allowing American tech giants to gain control of all the excavation equipment

PARIS: Europe is sitting on a wealth of data that is the 21st century equivalent of a precious metal mine during the gold rush.
But instead of exploiting it themselves Europeans may be allowing American tech giants to gain control of all the excavation equipment, some experts say, pointing to a flurry of European companies announcing deals with US tech players for cloud services.
Renault, Orange, Deutsche Bank, and Lufthansa recently plumped for Google Cloud. Volkswagen signed up with Amazon Web Services. The French health ministry chose Microsoft to house its research data.
The cloud is a term for offering data storage and processing services externally so clients don’t need to invest as much in costly gear.
This trend has sparked concern particularly in Germany, which has a rich trove of data thanks to its powerful industrial sector.
The EU is “losing its influence in the digital sphere at the moment it is taking a central role in the continent’s economy” warned a recent report by a group of experts and media leaders under the leadership of the former head of German software firm SAP, Henning Kagermann.
“The majority of European data is stocked outside of Europe, or, if stocked in Europe, is on servers that belong to non-European firms,” it noted.

A senior French official recently delivered an even more blunt assessment in a meeting with IT professionals.
“We have an enormous security and sovereignty issue with clouds” said the official at the meeting, which AFP attended on the condition of respecting the anonymity of participants.
“In many cases it is convenience or a sellout” by European companies and institutions “because it is simpler” to sign up with US tech giants than find European options, said the official.
“However we have very good firms offering cloud and data services,” he added.
One of the causes of concern for Europeans comes from the Cloud Act, a piece of legislation adopted in 2018 that gives US intelligence agencies access in certain cases to data hosted by US firms, no matter where the server may be physically located.
“My company is American and I know very well what the implications are of the legislation,” said a Franco-American executive.
“And given what is happening in US policy debates, that situation won’t be getting better.”
Beyond the integrity of data, it is the capacity to analyze and exploit that information that worries many European experts and policymakers.

If in Europe “we are just capable of generating data and need others to exploit it then we are going to end up in the same situation as countries with mineral resources that rely on others to process it and end up with meagre economic benefits,” said the French official.
The French and Germans unveiled in June the GAIA-X project that aims to develop a competitive European cloud offer.
Rather than encourage the development of a European champion — in the mold of Airbus in response to Boeing — that would offer the full gamut of services, the project takes a different tack.
It aims to set standards so different firms could offer storage, processing, security and artificial intelligence services seamlessly. It would operate as a marketplace of sorts where each client could find the services they need without having to leave European jurisdiction.
It is hoped GAIA-X’s decentralized model might prove a better fit with the issues raised by treatment of data from connected devices.