The Bank of England (BoE) announced a sharp cut in interest rates on Wednesday (March 11th) this week. The decision was made in response to the continued spread of the COVID-19 coronovirus outbreak. The move sees the base rate of interest fall by 50 basis points (bps), from 0.75% to 0.25%.
A statement from the Bank of England announced that the move was made to offset the “economic shock” associated with the rapid spread of the viral epidemic.
More than 120 countries have reported finding cases of COVID-19 within their borders. The rapid spread of the virus has created disruptions across multiple sectors. Containment strategies are impacting elements of everyday lives from retail and travel to work and pay.
• READ MORE>> How COVID-19 has changed the way we work & recruit.
There were immediate political reactions to the BoE decision. Acting leader of the Liberal Democrats Ed Davey described the move on Twitter as: “Excellent pre-emptive action by the Bank of England.”
Mr Davey went on to call for additional assistance for small businesses. “We now need a Budget emergency fund focused on small business, the self-employed & zero hour contract workers.
“We must prevent an economic downward spiral & make it easy for people to self-isolate.”
Mr Davey’s comments highlight one of the primary concerns for enterprise: the risk of economic activity grinding to a halt.
Robert Colville, the director of conservative think tank the Centre for Policy Studies, revealed additional assistance for SMEs. “Just seen the Bank has also set up a £100bn facility for banks to loan at v low cost to businesses, especially SMEs. Good.”
What does this mean for business?
At present, the “Keep Calm and Carry On” approach seems the most common. The government has issued no widespread emergency measures such as the closure of schools or transportation networks. However, guidance has been issued advising against long-term and high-volume public meetings. In highly infected nations such as South Korea, widespread quarantine restrictions have been shown to work.
However, there is a certain degree of risk to financial stability if large parts of the economy are closed because of epidemic worries. While Britain has not adopted the toughest measures so far, they remain an option. And, in such a situation, the economic impact of the COVID-19 epidemic is not being underestimated.
The concern that at-risk enterprises could be irreparably damaged by economic slowdown was addressed in the chancellor’s spring budget. Along with the cut to interest rates, the Bank also loosened restrictions placed on commercial banks making loans to businesses. A new £100bn funding scheme will assist SMEs with low cost loans. The injection of fresh credit may enable struggling firms to secure their futures during periods of slower trading.
What are the management strategies?
eBoss has prepared a broad ‘survival guide’ to get smaller businesses through potentially difficult periods. Our run-through of priority matters includes economic uncertainties and how to manage a remote workforce. But it also tries to allay the fears – suggesting that recruiters could unearth new opportunities in a workplace that is rapidly restructuring itself.
In terms of the interest rate cut, the immediate effect is the reduction in the value of saved capital. With savings offering less of a return in terms of interest payments, the BoE has indirectly -though perhaps intentionally – incentivised investment. Now may be the perfect time to recruit staff or upgrade systems to modernise your workplace. Why? Because uncertain times tend to create a buyer’s market.
One of the key areas of investment for 2020 is workplace modernisation and futureproofing with next-generation technology and skills. This could prove beneficial for recruiters who are able to facilitate the prompt acquisition of in-demand skills. In this regard, confidence and a cool head may help smart recruiters find unexpected opportunities amidst the disruption and chaos of COVID.
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