UK interest rates cut, funds freed up to ease virus impact

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The front page of the Evening Standard reading 'UK virus outbreak has begun - official' is displayed at Bond Street Station, in London, Friday, March 6, 2020. British Prime Minister Boris Johnson said the U.K. will face a substantial period of disruption from the new coronavirus. (AP Photo/Alberto Pezzali)

LONDON – Britain took bold steps on Wednesday to cushion the economic shock of the coronavirus outbreak, as the government announced a 30 billion-pound ($39 billion) stimulus package and the Bank of England slashed its key interest rate to a record low of 0.25%.

U.K. Treasury chief Rishi Sunak said the new virus sweeping the globe — arguably the biggest economic shock since the global financial crisis 12 years ago — would have a “significant” economic impact, but it would be temporary.

“We are doing everything we can to keep this country and our people healthy and financially secure,” Sunak said. “We will get through this together.”

In the government's annual budget, Sunak announced measures including extra funding for the health service, sped-up sick pay and benefits payments for people who are off work, and relief for struggling businesses.

He said the government would refund the cost of sick pay to firms with less than 250 employees and would provide cheap loans for small businesses struggling because of the COVID-19 illness.

Sunak said the measures, which include 7 billion pounds for people and businesses, 5 billion pounds for the health service and 18 billion pounds in other spending this year, would “protect the vast majority of businesses through the worst of the crisis."

In a coordinated move, the Bank of England earlier reduced its key rate from 0.75% to 0.25% to help support businesses and consumer confidence.

The cut took the rate to a low last reached after Britain's June 2016 vote to leave the European Union and follows similar reductions from the U.S. Federal Reserve and the Bank of Canada. The European Central Bank is also expected to announce a stimulus package on Thursday.