Sunak expands help for lockdown-hit firms as recovery wanes

LONDON (Reuters) – British finance minister Rishi Sunak on Friday announced his latest programme to try to stave off a surge in unemployment, offering extra help for businesses and workers who are forced to stop work during local coronavirus lockdowns.

FILE PHOTO: Britain’s Chancellor of the Exchequer, Rishi Sunak, leaves a television studio in London, Britain, October 6, 2020. REUTERS/Toby Melville

In a move likely to cost billions of pounds over the six-month duration of the new scheme, Sunak said the government would pay up to two-thirds of employees’ salaries, capped at 2,100 pounds a month each, if they work for companies that are forced to close temporarily.

A resurgence of the pandemic has forced Prime Minister Boris Johnson to consider new containment measures and is threatening to derail an economic recovery that was already starting to wane.

Data published earlier on Friday showed growth in August was much weaker than expected.

Sunak, whose emergency spending measures were already on course to cost about 200 billion pounds and push the budget deficit to its highest since World War Two, had resisted calls to increase the generosity of his wage support schemes.

His announcement on Friday is likely to herald the temporary closure of bars and other businesses. There are around 2.5 million jobs in the hospitality sector.

Pubs across England, Wales and Scotland were forced to close early from last month. Scotland’s government has since ordered a 16-day closure of pubs in the country’s two biggest cities, starting on Friday.

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“I hope that this provides reassurance and a safety net for people and businesses in advance of what may be a difficult winter,” Sunak said.

Hospitality companies are likely to be among the heaviest users of the expanded support.


A Treasury source said the new wage support measures, which will last for six months from Nov. 1, were likely to cost hundreds of millions of pounds a month.

Under the scheme, employers will not be required to contribute towards wages and only asked to cover social security and pension contributions.

The move to expand the Job Support Scheme – itself announced only two weeks ago – means furlough-type help will remain available to companies hit by lockdowns after Sunak’s flagship, economy-wide furlough programme closes at the end of this month.

Torsten Bell, chief executive of the Resolution Foundation think tank, welcomed Sunak’s new measures but questioned why it took so long. “The delay in putting it in place will have come at a high price in jobs lost,” Bell said.

Economic output rose by 2.1% in August – less than half the median forecast in a Reuters poll of economists and the slowest increase since the economy began to recover in May from a record slump.

The opposition Labour Party said earlier the government had lost control of the virus, harming the economy in the process.

“Businesses, which have stepped up to help our country and economy through this pandemic, will face a weekend of uncertainty about whether or not they will be able to stay open,” Labour leader Keir Starmer wrote in the Daily Telegraph.

An official estimate on Friday showed the average daily number of COVID-19 cases in England had doubled in a week, as scientists warned that action was needed to avert a calamitous and unnecessary spike in deaths.

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