Good Morning,

Not without risk, is how we’d describe Rishi Sunak’s spending plans. The chancellor’s going to rack up an eye watering bill in a bid to get some much needed confidence (and money) circulating around the economy and his list of ways to do it, we think, is fairly imaginative: The furlough scheme will come to an end, but his approach to extending its longevity is that for every employee that is retained until January next year, a thousand pounds will be paid to the company. Additionally, a £2bn ‘kickstart jobs’ scheme will be launched to fund six month work placements for 16-24 year olds who receive universal credit.
The stamp duty threshold will rise to £500k, which is hoped will stimulate the ‘second time buyer and beyond’ housing market, which in turn should have a trickle down into housing stocks at the lower end of the ladder, as well as everything else that comes with buying a house (building it, decorating, moving, buying furniture etc.) which would all be duly welcomed economic activities across services, construction and maybe a bit of manufacturing to boot.
Out and about, you’ll get a half price meal (up to £10 per head of government contribution) if you’re dining out Monday to Wednesday – and coupled with a VAT cut in hospitality to 5%, means your average two person, two course meal with a glass of wine each would go down from around £52 to about £25.50, or a £100 bill coming down to £67.50.
There’s a green housing initiative in there too: Starting in September the government will heavily subsidise the retro-fitting of insulation for homes. This is a big one, as it’s a job creator, an energy saver and an environmental win. Which begs the question, why isn’t there more of this?

The plans have been criticised by the opposition for not being extensive enough, but as the chancellor said himself ‘if I’d have stopped furlough in August, they’d have said keep it to September. If I’d have stopped it in November, they would have said wait until next year’, basically not everyone was going to be happy and he’s had the task of creating stimulus packages whilst also working out how to pay for it. Borrowing this year is now going to exceed £350bn and if you compare that to last year’s forecast of £44bn, you can see why he’s perhaps hesitant to go in even further, particularly when he’s got his budget due in Autumn and can always do more then, if needed.

Across the Channel: France has seen an uptick in reported cases and the average for the last seven days is north of 500 a day. The death toll is also increasing, almost doubling the seven day average yesterday with a jump to 32 from 18. They’re approaching numbers they saw in June, but are still a long way off their May averages, however this direction of travel has led their health ministry’s director general to say that the country should “brace itself for a pick-up of the pandemic, even for a second wave”. France has been doing an incredible job of an economic bounce back. There are obvious concerns that this now may not be the case.

On Brexit: Fishing negotiations seem to be gathering momentum, as our environment secretary followed up Michel Barnier’s attempt to break the stalemate by saying that the UK and Europe could negotiate multi-year deals to certain fishing rights, instead of having to get back to the table every year. The move sounds small, but getting a deal palatable enough for both parties for the next few years would be enough to tick this box and move on.

Over in the US: Data is showing that trips to shopping malls have flattened out, as the rebound momentum stalls. Additionally in states where there have been spikes in cases, the numbers venturing out to the shops have fallen dramatically. This trend is not just down to risks of catching the virus, but risks of running out of money. With the extended unemployment benefit payments that the government there have been making due to expire at the end of the month, people have stopped spending the cash that they were getting. The business rebound is also on shaky ground in certain sectors, with Federal Reserve data showing that businesses aren’t having much success in refilling their order books.

Job losses in the States are far from over too; and the latest announcement was from United Airlines who notified 36,000 staff that they could furloughed – though in the US that’s enforced unpaid leave with no government subsidy. The job losses wouldn’t come into effect until October 1st, but equate to roughly half of their entire workforce.  We’re yet to get details on Trump’s next round of bailouts, but the US economy could certainly do with those details sooner rather than later if they’re to pick up their stalling momentum.

One to end on for today: The Independent are running a story that says Trump has a 91% of winning a second term! The calculation has been made by a political science professor who has an 83% success rate in predicting election outcomes (that would have been 92.5% had he started using the model in 1912) and uses the early nomination process of the two candidates to predict success. It says that Joe Biden’s early faltering in the bid to get the Democratic nomination will potentially have cost him the election.

Be well


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