The Bank of England has boosted quantitative easing by £150bn, in addition to holding interest rates at 0.1%.
The Bank’s Monetary Policy Committee said the economy is expected to avoid another recession, but unemployment is likely to rise as government support schemes end.
The unemployment rate is forecast to increase to around 6.3% by the end of the year and to almost 8% early in 2021.
Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown, said: “The Bank of England is administering a large dose of medicine to the UK’s ailing economy by ramping up bond buying with the aim of lowering borrowing costs to relieve pressure on businesses and households.
“It’s now clear the UK faces a long road to recovery with the potential of further setbacks along the way. Lockdown mark 2 is forecast to push GDP down by 2% mainly due to a slowdown in social spending which means the economy could be heading for a double dip recession.
“Although the extension of the furlough scheme will clearly protect jobs, it’s not a magic potion and struggling companies will still have to reduce headcount to survive.”
Douglas Grant, director of Conister, said: “The quantitative easing measures announced by the Bank of England today will be welcomed by businesses across the UK as the latest COVID-19 measures come into effect.
“SMEs in particular will welcome the news that the Bank of England is predicting that we will avoid another recession and that the deadline to apply for the Government’s Bounce Back Loans Scheme has been extended. However, businesses should look to capitalise on the measures put in place to structure their debt and ensure they are resilient in the face of the upcoming adversity to the sector.
“SMEs have shown a great deal of adaptability and resilience in the face on changing consumer behaviour and as such it is critical that economic and monetary stimulus in tandem with government schemes work in partnership with specialist lenders to continue to support the sector so that we can return to pre-crisis growth levels as soon as possible.
“We are determined and absolutely focussed on working with these companies to protect those robust businesses operating in sectors that are resilient and ultimately will grow stronger with the necessary capital in the long term.”