‘Not ingredients for activity’: Treasury reveals fiscal stimulus to battle coronavirus slump

Amid growing economic uncertainty, the Treasury on 11 March announced a budget looking to reassure businesses as coronavirus fears continue to rise and law firm partners brace for a slowdown.

The budget comes as early optimism for 2020 has turned to anxiety among major law firms, with clients become increasingly impacted by the global outbreak of coronavirus. Chancellor Rishi Sunak unveiled a £30bn package to help tackle the virus, which included the abolition of business rates for small businesses and a £1bn government-backed loan scheme.

‘It’s too premature to make confident predictions but likely economic stagnation in some sectors combined with sliding equity valuations and market uncertainty are not helpful ingredients for M&A activity,’ Slaughter and May’s head of corporate Andy Ryde told Legal Business. ‘We’re therefore braced for a slower period, but would be optimistic for a quicker and higher bounce-back than we saw following the global financial crisis.’

Many in the market feel restructuring and insolvency lawyers will be in higher demand as coronavirus acts as a trigger for businesses already at risk, as seen in the recent collapse of UK airline Flybe. However, the government-backed loan scheme will be available only for businesses affected by the virus that are otherwise viable.

‘The main message from the government is “we’ll do whatever it takes,” but putting a number to the measures needed is difficult,’ Simmons & Simmons corporate partner Martin Shah told Legal Business. ‘It’s a confident message of saying the government will help businesses get through this with grants and loans as well as tax arrangements.’

A slew of law firms have been forced to respond to the virus, cancelling partner conferences and closing offices. Earlier this week, Quinn Emanuel Urquhart & Sullivan temporarily closed its New York office after a partner tested positive for COVID-1, while Baker McKenzie was the first major firm in London to be forced into a decision, briefly closing its 1,000-employee office after a member of staff was taken ill following a return from Northern Italy.

Also in a bid to support the economy, the Bank of England cut interest rates today in an emergency move. The monetary policy committee voted unanimously to slash the bank rate from 0.75% to 0.25%, in the hope of stemming fallout in the markets and supporting demand.

Meanwhile, the government also revealed consultation plans over the coming months for a possible levy to fund new action on money laundering. According to the budget report: ‘The government intends to introduce a levy to be paid by firms subject to the money laundering regulations to help fund new government action to tackle money laundering and ensure delivery of the reforms committed to in the Economic Crime Plan.’

Some in the legal profession believe the measures are not enough, however. Kingsley Napley criminal litigation partner Alun Milford commented: ‘The government needs also to ensure investment in extra prosecutors and a proper functioning court service to deal with money laundering and fraud cases effectively. Only with investment across the system will the authorities really be able to boast about a significant ramping up of the war on dirty money and financial crime and to meet the objectives set out in the Economic Crime Plan.’

The government also revealed a £14m backing of Companies House in an effort to ‘continue with vital capital projects to help its work tackling economic crime and anti-money laundering.’