The new Bank of England governor Andrew Bailey has said companies thinking about laying off workers should first consider the support the government and Threadneedle Street has made available to them during the coronavirus outbreak.
Bailey also said he would not rule out any steps for the Bank of England at this stage, leaving the door open to printing money to give to the British public.
The Bank has cut interest rates and made cheap funding available for banks to pass on to UK companies.
It has worked together with chancellor Rishi Sunak, who yesterday unveiled a £350bn package to support the economy as the virus spreads.
But markets have not been reassured. The pound today fell to its lowest level since 1985 and the FTSE 100 was last down 3.8 per cent, following week of falls.
Economists think the UK will endure a deep recession in the first half of the year as containment efforts cause demand to slump and supply to plummet.
But the new governor – who replaced Mark Carney this week – told the BBC today that British companies should look hard at the support on offer before they lay off workers.
He urged firms to “stop, look at what’s available, come and talk to us [or] the government before you take that position”. He told firms the Bank will “will be there to support your needs”.
“It’s going to be a very big downturn – we know that,” he told Sky News. “We’re living in completely unparalleled times in terms of what’s happened in the last week – the closing of borders, the reduction of internal movement, the measures that preventing people from going about their daily lives, with good reason.”
Yet he said the Bank will do everything in its power to support the economy. The BoE is expected to relaunch its quantitative easing (QE) programme at its meeting next week, under which it digitally creates money to buy bonds.
When asked by Sky whether the Bank could go further and create money to give to the public, Bailey said that “nothing is off the table”.
“Everything is on the table that is reasonable, within the policy tool set,” he said. “We will meet the needs of the economy.”
Bailey also clarified some details about the corporate lending scheme Sunak announced yesterday, under which the Bank will create money to lend to big companies by buying their short-term bonds.
He said the scheme could be unlimited in size. “We didn’t announce it was ‘X’ because the reason for that is we don’t know,” he said.