LONDON- Britain is acting much sooner than European counterparts in scaling back job support, forcing businesses into tough decisions while they have little or no revenue.
As COVID cases surge again, hundreds of thousands of job losses are likely before the end of the year, industry groups and analysts warn.
Finance minister Rishi Sunak ripped up the economic orthodoxy of his Conservative Party at the onset of the pandemic with his Coronavirus Job Retention Scheme.
The scheme paid up to 80 percent of the wages of furloughed staff, at a total cost of about 50 billion pounds ($65 billion). It benefited around 9 million employees at its peak, cushioning the impact of an unprecedented 20 percent collapse in economic output But Sunak has warned he cannot save all jobs, and – with one eye on record government borrowing – he will end the plan on Oct. 31.
Roughly 2 million workers were receiving some help from the program in September, mainly in hospitality and entertainment.
In its place, businesses will receive a 1,000 pound grant for every employee they retain for at least three months, and the government will top up salaries of workers who return part time, as long as businesses contribute an equal amount.
Britain is currently reporting five times as many new cases as Germany, and has Europe’s highest death toll, with more than 42,000 fatalities.
For the broader hospitality sector, concerns are even greater. Last week it warned that well over half a million job losses were looming as the government imposed early closing on pubs and restaurants.
The Bank of England has forecast the jobless rate would hit 7.5 percent by the end of the year and the number of people unemployed would almost double to 2.6 million.
Official data on Tuesday showed unemployment in the three months to August rose to 4.5 percent, its highest since 2017, and there were 227,000 redundancies, the most since 2009.
Large employers looked on course to make 600,000 people redundant in the second half of 2020, said Tony Wilson, director of the Institute for Employment Studies think tank, based on notices of possible redundancies firms gave the government.
Wilson – like many analysts – thinks Sunak’s recent measures could have been better designed to limit job losses by targeting the sectors that have found it hardest to recover from lockdown.
The new Job Support Scheme requires firms to contribute to top-up pay for workers on reduced hours, in contrast to short-time schemes in countries such as Germany.