UK Budget: Rishi Sunak extends furlough scheme and plans post-Brexit stock market shake-up

Finance Minister to continue job support programme until end of September and looks to reform listing rules

Mr Sunak makes final preparations ahead of the budget in which he plans to use 'the full measure' of Britain's 'fiscal firepower' to protect jobs and livelihoods. HM Treasury

Britain's Finance Minister Rishi Sunak will protect jobs in his budget on Wednesday by extending the furlough scheme until the end of September, while also setting out plans to overhaul the London Stock Exchange in a post-Brexit shake-up.

The Coronavirus Job Retention or furlough scheme, which has protected 11.2 million jobs since the start of the crisis, will be extended beyond the existing deadline of April 30.

Mr Sunak will also publish the review findings by Jonathan Hill, which recommends a post-Brexit shake-up of listings rules to lure tech companies to the City of London.

Addressing Britain’s Parliament on Wednesday, Mr Sunak will set out a three-point plan to support people and businesses through the crisis, start fixing public finances and begin building the future economy.

He will vow to do “whatever it takes” to steer the country’s economy through this “moment of crisis” and promise to use “the full measure of our fiscal firepower to protect the jobs and livelihoods of the British people”.

The UK has spent about £300 billion ($416.65bn) on coronavirus support since the crisis began and Mr Sunak said this presents a “challenge” for the country’s public finances, with public sector borrowing for the fiscal year soaring to £270.6bn by the end of January.

The cost of Britain’s furlough scheme reached £53.8bn last month, with 4.7 million jobs covered by the scheme as of the end of January.

The extension to the scheme takes its protection beyond June 21 when Prime Minister Boris Johnson hopes all restrictions will be lifted under his roadmap out of lockdown.

Mr Sunak said it was “only right to continue to help businesses and individuals through the challenging months ahead and beyond”.

While employees will receive 80 per cent of their salary until the scheme ends, employers will be asked for a 10 per cent contribution in July, and 20 per cent in August and September.

Mr Sunak will also issue direct cash grants to more than 600,000 self-employed workers, including those who set up on their own in the most recent fiscal year.

Separately, Mr Sunak will consider Mr Hill’s recommendations for the LSE, which include updating rules around free float requirements, dual class structures and special purpose acquisition companies (Spacs) to strengthen the UK’s position as a world-leading financial centre.

The move is considered a post-Brexit fightback from Mr Sunak, who wants to help London compete with global centres such as New York, Amsterdam and Frankfurt and lure tech founders to the LSE, after it raised £43bn in equity capital last year.

Mr Sunak asked former European Union finance commissioner Mr Hill to lead the review in November because he “wanted bold ideas”.

“The UK is one of the best places in the world to start, grow and list a business – and we’re determined to enhance this reputation now we’ve left the EU,” Mr Sunak said on Tuesday.

In the run-up to Britain’s exit from the EU, several global banks moved financial staff and assets from the City of London to Europe with the number of Brexit-related job moves totalling 7,600, financial services consultancy EY said.

EY said that while the pace of asset and job relocation announcements had eased, it would be replaced by “a slower yet ongoing movement of people and assets to Europe for compliance purposes", according to Omar Ali, a financial services managing partner at EY.

However, Mr Sunak said he was hopeful that reforms set out by Mr Hill would help to boost the UK’s business environment and ensure the country leads “the world in providing open, dynamic capital markets for existing and innovative companies alike, whilst protecting the high standards that underpin our status as a world-leading financial centre”.

Mr Hill’s key recommendations include modernising rules to allow dual share class structures in the LSE’s premium listing segment, which would allow founders to retain control over their companies by giving them deciding votes on key decisions such as corporate takeovers.

Reducing free float requirements – the amount of a company’s shares in public hands – to 15 per cent from 25 per cent, will allow companies to use other measures to demonstrate liquidity.

The Hill review also recommends liberalising rules around increasingly popular Spacs, which raise money from investors and then list on a stock market before looking for an investment target with which to go public.

Spacs were among the most prolific participants in Wall Street’s IPO market last year, with more than 200 blank-cheque companies raising more than $80bn, Bloomberg said. The pace has accelerated, with more than $50bn raised so far this year.

Spacs are typically created by a sponsor, usually well-known executives, private equity or venture capital firms to raise money for yet-to-be identified future investments. If no targets are found within two years, the blank-cheque firm is dissolved with the cash returned to investors. In case of a takeover, shareholders can retain their shares or redeem their holdings if they do not like the deal.

Almost 180 Spacs have been filed or priced this year in New York, but there is none on the LSE, according to data from Refinitiv, while Frankfurt and Amsterdam have both had their first this year.

“The recommendations in this report are not about opening a gap between us and other global centres by proposing radical new departures to try to seize a competitive advantage," Mr Hill said.

"They are about closing a gap which has already opened up. All the recommendations are consistent with existing practices in other well-regulated financial centres in the USA, Asia and Europe.”

He urged Mr Sunak to produce an annual State of the City report that brings together ministers, regulators and the market to ensure the system promotes "the attractiveness of the UK as an international financial centre".

Other measures expected tomorrow from Mr Sunak’s budget on Wednesday include fresh business grants, new measures for loans and mortgages and further support for jobseekers.

He is expected to increase corporation tax from a UK record-low 19 per cent, extend the stamp duty land tax holiday on residential property purchases, pump more funds into the UK's vaccination drive and issue fresh support for the culture sector, sports industry and green initiatives.