Econ Impact of the Measures

A few thoughts on the new measures from the govt today:

• The scheme is bang in the middle of expectations. We had seen expectations of larger and smaller schemes - this seems to strike a balance in the middle.
• It's not explicitly targeted at specific industries such as hospitality and entertainment. However, the structure of the scheme will still benefit these sectors a lot more than other industries (particularly as it's aimed at smaller and medium businesses more than large business).
• If you are a pub/restaurant in a residential area that is now having to shut at 10pm and your revenue is going to suffer this will help you to avoid firing workers. This is likely to help this business survive longer term.
• If you are a city centre sandwich shop, it probably doesn't do enough for you because footfall will be a lot lower, particularly given the "work from home if you can" advice. However if more people work from home 2-3 days per week longer term, these businesses are in trouble from a permanent change. So the scheme isn't helping the firms who are at most risk from a structural change to the economy.
• Overall, very little in the way of market reaction as this is in the middle of expectations. Issuance will likely be higher than previously estimated - but we knew a scheme like this was almost inevitable after PM Boris Johnson announced the new stricter Covid-19 restrictions earlier this week.