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Britain’s public borrowing will rise to more than £350bn this financial year, with Rishi Sunak gambling on borrowing vast sums to minimise the long-term economic damage of the coronavirus crisis.

The chancellor’s summer statement outlined a new job support package worth up to £30bn to limit unemployment, with subsidised roles and incentives to spend on the hardest-hit sectors. The Treasury will also slash the value added tax rate for tourism and hospitality, and raise the stamp duty threshold to boost the property market.

The new package is likely to bring the deficit to £361.5bn, or 18 per cent of national income and the highest level of borrowing since 1944-45, according to Financial Times calculations.

Mr Sunak’s statement revealed his prime ministerial ambitions, associating him personally with the bold measures. But millions of jobs are still at risk in sectors such as retail and manufacturing, industry leaders warned.

Robert Shrimsley writes that Mr Sunak is Boris Johnson’s greatest asset as they bet on reviving economic demand. The FT View is that the package is more stopgap than kick-start, and relies on forces beyond the chancellor’s control. (FT)

How Covid-19 has hit public finances, public sector net borrowing in 2020-21 (£bn)

Coronavirus digest

  • The US coronavirus case total surpassed 3m on Wednesday after the biggest one-day increase. Donald Trump’s Tulsa rally “likely” contributed to a surge, a health official said. Political insiders benefited from the small businesses rescue.

  • The UK’s poorest made income gains during lockdown, according to Treasury analysis. The government authorised almost £50bn more spending on public services, including £15bn on PPE for health workers.

    The EU must not “waste any time” arguing over the bloc’s recovery fund, Angela Merkel urged. But Dutch resistance stands in the way of a crunch summit.

  • United Airlines will furlough up to 36,000 workers, just under half of its US workforce. The carrier also suspended flights to Hong Kong over mandatory crew testing.

  • European Central Bank president Christine Lagarde discussed the “brutal” crisis in an exclusive interview with FT editor Roula Khalaf. Watch it below. (FT, SCMP)

Global investors have focused heavily on China, Mike Mackenzie writes in Market Forces. Follow our live coverage here.

In the news

Huawei calls for UK reprieve Huawei has said it will be “months” before it can provide customers such as BT and Vodafone with full reassurance over the impact of US sanctions set to undermine its role in Britain’s 5G networks. (FT)

Tiny German bank bet big on Wirecard With investors reeling, Oldenburgische Landesbank, once known as “Grandma’s favourite bank”, replaced Deutsche Bank as a crucial lender to its then chief executive and biggest shareholder Markus Braun. (FT)

Silicon Valley eyes Hong Kong exit Beijing’s national security law has effectively moved Hong Kong’s internet behind China’s Great Firewall, forcing Silicon Valley to consider a retreat. Ant Group, Alibaba’s fintech arm, is targeting a $200bn-plus valuation in a Hong Kong listing. The FT View finds tech giants are at the forefront of east-west decoupling. (FT, Reuters)

  • Separately, Australia has warned its citizens not to travel to Hong Kong and suspended its extradition treaty with the territory. (FT)

‘Hong Kong authorities can now move up every link in the chain of how information goes from a server to your phone or laptop,’ says Paul Haswell, partner at law firm Pinsent Masons © FT montage; Bloomberg

Fed withdraws from repo market The Federal Reserve has wound down its 10-month intervention in volatile short-term borrowing markets. Federal Reserve Bank of Boston president said future virus outbreaks will “ramp up” demand for business support. Gold prices broke $1,800 an ounce for the first time since 2011. (FT)

Universities sue over immigration policy Harvard and MIT have sued to block the Trump administration’s attempts to eject foreign students from the US if courses move online because of coronavirus, which could affect 1m students. The US Supreme Court ruled that employers with religious or moral objections do not have to cover employees’ contraception. (FT, CNN)

WTO race Kenya’s Amina Mohamed and Nigeria’s Ngozi Okonjo-Iweala emerged as frontrunners to become the next director-general of the WTO, as nominations closed on Wednesday. Britain’s Liam Fox and Saudi Arabia’s Mohammad Maziad Al-Tuwaijri were late entrants. (FT)

Kenya’s foreign minister, Amina Mohamed, is a frontrunner for the WTO role © Attila Kovacs/MTI /AP

PolicyBazaar chief admits ‘mistake’ The chief executive of the $1.65bn Indian insurance aggregator said that a huge SoftBank-backed expansion led the company to run at a loss. Brooks Brothers, the US retailer whose upmarket suits clothed Wall Street, filed for bankruptcy protection. (FT)

Facebook caused ‘serious’ rights setbacks The social media company made “vexing” decisions over the past nine months in “serious setbacks for civil rights”, according to a damning audit. Facebook removed a disinformation campaign linked to Donald Trump associate Roger Stone. (FT)

Malaysia maintains 1MDB fight Malaysia is targeting a settlement of between $2bn and $7.5bn with Goldman Sachs over the bank’s involvement with the 1MDB state investment fund, Zafrul Aziz, finance minister, told the FT. (FT)

‘We continue to engage [Goldman] . . . It will stop when we get the right number,’ Zafrul Aziz said in an interview © Bloomberg

The day ahead

Eurogroup leadership vote Eurozone finance ministers meet to select their next chief on Thursday, as Mário Centeno steps down to lead Portugal’s central bank. The divisive favourite is Spain’s Nadia Calviño, our Brussels Briefing newsletter writes — sign up here. (FT)

Rolls-Royce reports The UK aero-engine maker offers a first-half trading update on Thursday. Shares fell more than 10 per cent last week following a report that it was considering raising funds amid an industry downturn. (FT)

US jobless claims The number of new weekly unemployment claims is forecast to continue its downward trend, after hitting 1.4m last week. The unemployment rate fell to 11.1 per cent in June. (FT)

What else we’re reading

Meet the Recessionals Millennials should be entering their peak earning years, but the “double blow” of the 2008 financial crisis and coronavirus has proven a devastating setback. Read more in our FT Series: the New Social Contract. (FT)

Millennial college graduates have high debt but less ability to find high-paying work © FT montage; Jason Henry; Getty Images

ESG investing makes financial sense Irritated investors have joked that ESG should stand for “eye-roll, sneer and groan”. But early 2020 stock returns suggest that virtue pays, Gillian Tett writes. (FT)

Al Gore tells our Moral Money newsletter that “investors who do not recognise this new reality . . . are in serious danger of . . . leaving money on the table”. Sign up here.

How the Mafia infiltrated Italy’s hospitals The ’Ndrangheta is little-known outside Italy, but it has grown into one of the western world’s most dangerous and financially sophisticated criminal enterprises. In Italy’s public health system, it found a golden opportunity, an FT investigation found. (FT) 

By corrupting local officials, organised criminals have made vast profits from monopolies on services ranging from delivering patients in faulty ambulances and transporting blood to taking away the dead © Sergiy Maidukov

Bias against black researchers One of the most shocking discoveries about Covid-19 has been its disproportionate impact on black, Asian and other ethnic minorities. But just as scandalous is that few black scientists are leading research into why this is the case. (FT)

Boohoo’s fightback Boohoo’s chief executive insisted his company had “nothing to hide” following allegations of worker mistreatment in its supply chain. Some of the fast-fashion retailer’s biggest investors are betting he is right, increasing stakes even as its share price went into freefall. (FT)

Chart of the transparency index for 250 of the world's biggest fashion brands covering the overall transparency score, policy and commitments, governance, supply chain due diligence and remediation, spotlight issues and traceability. Boohoo scores poorly on all of these measures, whereas brands like H&M and Adidas are near the top of the indices

The threat to liberalism will outlive Trump Janan Ganesh warns that the US president’s successors will be more conservative and better equipped to govern. Simon Kuper has advice for Democrats seeking to unseat Mr Trump. (FT)

Nile frictions In a few weeks, Ethiopia will begin employing a $4.8bn mega-dam, Africa’s largest hydroelectric power plant and the most ambitious attempt to harness the Nile in history. But the project has raised tensions with Egypt and drawn attention from Gulf states, China, Turkey and the US. (FT)

Foreign powers have always been drawn to the Horn of Africa for its proximity to the Red Sea, which controls access to the Suez Canal © Ingram Pinn/Financial Times

Podcast of the day

Putin: a president trapped in power Now in command until 2036, Vladimir Putin faces a difficult future as the Russian economy stagnates and popular unrest grows. Gideon Rachman speaks with Catherine Belton, author and former FT journalist. (FT)

“I think he’s hostage to the system that he created. The way they shored up power the way that he and his security men shored up power makes any transfer of power fraught with risk for them.”

Thank you for reading. Send your recommendations and feedback to firstft@ft.com



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