The UK authorities declares a brand new job help program however warns that not each firm will be saved
Chancellor of the Exchequer Rishi Sunak leaves 10 Downing Street after attending a Cabinet meeting on February 14, 2020.
LONDON – UK Treasury Secretary Rishi Sunak has announced a new emergency package of measures to curb unemployment, replacing the country's vacation program due to expire next month.
The Job Support Scheme will directly top up the wages of workers who work fewer hours due to suppressed business demand, and allow workers to keep their jobs for shorter hours rather than being laid off. It will run for six months from November.
Employees must work at least a third of their normal working hours and be paid as usual for this work. However, the government will raise wages to cover the remaining two-thirds of earnings. The program is aimed at all small and medium-sized businesses in the UK. However, larger companies may be eligible if they experienced a decline in sales during the crisis.
"I cannot save every company, I cannot save every job, no chancellor (the treasury) could, but we can and must deal with the real problems that companies and employees are now facing," Sunak told the House of Commons on Thursday.
The vacation program subsidized 80% of wages for millions of workers on leave as a result of the pandemic, but Sunak confirmed in July that it would be wound up when the country emerged from lockdown measures and instead offered companies a bonus program for bringing them employees on leave to return to work.
Given that many of these workers were in the hospitality industry and the government is now being forced to reintroduce some restrictions due to a surge in Covid-19 infections, economists have warned the country will face a significant surge in unemployment in the fourth quarter could be quarter.
Employers who keep employees on leave for shorter working hours can now take advantage of both the Job Support Scheme and the Job Retention Bonus.
Sunak also announced an extension of the 5% sales tax rate (sales tax) through March 31, 2021, and promised to defer sales tax invoices for businesses and give them the option to split sales tax invoices into 11 smaller payments to help prevent a March credit crunch .
In addition, with a "Pay as you grow" program, small businesses can extend their government recovery loans for a decade of six years to reduce monthly repayments.
The pound sterling rose on the announcements, trading at 1.2761 against the dollar around 2:30 pm. London time.
More challenges will come
Earlier this week, Prime Minister Boris Johnson announced a 10 p.m. Pub curfew to curb the spread of the virus. The UK reported 6,178 cases on Wednesday, an increase of 1,252 since Tuesday, and took its total confirmed cases over 412,000.
Just last week, the Bank of England gave its first hint that negative interest rates could be considered as it seeks to do its part in propping up the economy against the aftermath of the pandemic, with US GDP rising to a record $ 20. The second quarter fell 4%.
Karen Ward, chief EMEA market strategist at JPMorgan Asset Management, said it was too early to say how Covid-19 will change consumer behavior, and it is therefore difficult to determine if the new program is just an inevitable reallocation of resources delayed.
"The experience of the past few months suggests that consumers want to return to recreational facilities and travel when it is safe to do so. A viable vaccine – which the news could come of any day – would make it easier to return to life, as we knew in 2019." Ward said in a statement following the announcement, adding that as a result, Sunak was right to ensure the support remains in place for the time being.
She suggested that while the new measures reduce one of the main downside risks to the economy and prevent a sudden fall in unemployment, other risks remain.
"We still don't know whether the previously announced restrictions will be enough to contain the spread of the virus or whether additional measures are required. And most importantly, an end of the year without a sufficiently comprehensive trade deal with the EU could lead to even more." UK Business Challenges. "