UK government to expand Covid-19 rescue loan scheme

The Guardian has reported that the government is expanding its Covid-19 rescue loan scheme to cover small businesses on the edge of collapse, a move that Labour warned would come too late for many troubled firms.

Lead paragraphs 

With less than a week before the furlough scheme covering 9 million employees is cut back, plunging more employers into debt, the Treasury said it would use a change in EU state aid rules to allow firms previously locked out of the coronavirus business interruption loan scheme (CBILS) to access government funds.

The economic secretary to the Treasury, John Glen, said he would write to major lenders advising them of the change, which will make more small businesses – specifically those that have racked up large losses and debts – eligible for loans of up to £5m. By the end of June, more than £11bn had been lent to more than 50,000 businesses under CBILS.

Market implications

This is positive for GBP bulls in light of the Brexit uncertainty.

Overall, a broad weakening on the greenback has been a major contributor to G10-FX. 

Also, hopes for a vaccine has fuelled optimism in the markets and news that Britain has signed a supply deal for up to 60 million doses of a possible COVID vaccine will be a positive input for selling markets in general. 

However, with Brexit negotiations deadlocked, the other pillars of monetary policy and the UK economy could well come crashing down for the pound later this year.