The third lockdown has begun – but how bad will the economic damage be this time?

Rishi Sunak’s new package of support measures for businesses is welcome, but we should be realistic about its impact, writes Hamish McRae

Restrictions have forced many businesses in the hospitality, retail and leisure sector to close (PA)

Bang. The third lockdown begins. Rishi Sunak’s new package of support measures will blunt its impact for some businesses that have been particularly hard hit. But it would be naive to expect the government to be able to offset the full damage, damage that will mount inexorably as the weeks of shutdown continue. 

The package first. The chancellor has already announced the string of emergency measures, which if you tot them up come to something like £280bn. These include the job protection scheme that has been extended to the end of April. Now we have another £4.6bn of grants directed particularly at the smaller hospitality, retail and leisure businesses. It is an imaginative scheme, based on rateable value, with grants of £4,000, £6,000 or £9,000 per property. If you are running a couple of pubs two cheques for £9,000 each is very helpful. The money is spread thin, with 600,000 businesses expected to be helped. As part of the package there is £694m in a discretionary fund to help other businesses that would not benefit from a rates-based payout. After all, a lot of small firms nowadays don’t operate from a business property.  

The plan deserves a welcome, but we should be realistic about its impact. You have to see the £5bn in the context of an economy that last year was £2,170bn. So in macro-economic terms this is negligible. It is targeted and that’s great. There will be some small businesses that will scramble through the next two months that otherwise might have had to throw in the towel. But it won’t move the dial as far as the overall economy is concerned. There may be some further modest measures in the coming weeks, but for the next stage of the government’s effort to limit the damage we will have to wait until the budget in March.