Fears for Jobs Rise as Employers Assess Cost of Sunak’s Winter Plan | Company


THere are several moving parts of the engine designed by Rishi Sunak to keep the UK economy running next year. Most important is the replacement of the leave program which has allowed around 9 million workers to work at any given time in the past six months.Just days before the Chancellor rose to present his “winter economy plan” on Thursday, Boris Johnson announced a six-month extension of restrictions on sporting and cultural events and a new “rule of six,” limiting the number of people who can gather. at any moment.

Pubs were told to only serve patrons seated at tables and an 10pm curfew killed any plans downtown bars might have had to stay open until the early hours of the morning.

It was clear that business and union leaders, still reeling from the Prime Minister’s new rules, saw an extension of the leave scheme, or at least a generous replacement, as the key to avoiding mass unemployment. The extent of their disappointment was evident after Sunak said he would drastically reduce support for the workers most affected.

From manufacturing to hospitality and recreation, it has been said that the winter plan falls short of expectations and companies are moving forward with more layoffs.

Before the program was announced, the Bank of England predicted unemployment would rise to 7.5% – or more than a million more unemployed workers. Several economists have said Sunak’s efforts will fail to prevent the UK from reaching this milestone.

Adam Marshall, the managing director of the British Chambers of Commerce, said the Chancellor must “remain open to taking further steps to support parts of the economy facing unprecedented challenges in the months to come”.

Make UK, the lobby group for manufacturing and engineering companies, has said that the replacement of leave is so insufficient that many companies will be forced to lay off more workers. He highlighted the aerospace industry, which has seen demand for aircraft collapse, and auto industry suppliers among the hardest hit.

Starting next month, the government will pay 60% of wages under the leave program and companies will pay 20%, leaving workers facing a 20% pay cut unless their employer is more generous. This ends at the end of October, when the Employment Assistance Program (JSS) takes over.

Sunak was urged to “remain ready to take further action”. Photograph: Dominic Lipinski / PA

This provides less generous support. Under the new regime, the company pays 55% and the government pays a maximum of 22%. And instead of receiving those payments for not working at all, employees have to work at least a third of their regular hours.

The Resolution Foundation said the payment of JSS workers was similar to that seen in France, Germany and the Netherlands, but was punitive for employers in the UK, who will pay a larger contribution than their continental counterparts.

The foundation also pointed to a flaw in the plan after calculating that it would cost a company £ 1,500 to employ one full-time worker on £ 17,000, but more than £ 2,000 per month to employ two part-time workers on the same full. – time equivalent salary.

Few employers would seek to keep part-time workers when it would be cheaper to have fewer full-time contract workers, he said. The end result would be 6 million poor households, or £ 1,000 a year, in a worse situation from next April.

Tony Wilson, director of the Institute for Employment Studies, said boards would calculate the costs of firing workers against the costs of supporting part-time work. “This will lead to difficult discussions between leaders and unions over the next few months,” he said.

Wilson argues that Sunak’s package of measures, which also included tax deferrals, interest relief on loans and help for self-employed workers, does not meet what is needed to prevent unemployment from rising in arrow during winter.

Economists who demanded greater certainty from the Treasury in its approach to business support measures were also disappointed. Christian Spence, head of economic analysis at Manchester Metropolitan University’s Center for Future Economies, said that while millions of workers would continue to benefit from government support, “millions more are not being helped by this and need it ”.

He said the Chancellor forgot to improve funds for training and investment. “It has to come quickly – because the layoffs will be,” he said, adding that a lot more attention needed to be paid to the dismissed – “their health, their training needs to seek employment and their benefits. to support them ”.

Sunak said after his Commons speech that he was aware of the UK’s debt spiral and it was his responsibility to control the annual deficit.

But few economists believe he will be able to stick to his current plans as Covid-19 spreads again and more people are laid off.

Ruth Gregory, senior UK economist at consultancy Capital Economics, said: “It makes sense that the JSS is not as supportive as the holiday program, as the government’s new restrictions are not as tight as those in March.

“But we suspect that the effect of government restrictions announced this week and the possibility of tighter restrictions in the coming months will outweigh any downward impact on unemployment from today’s budget package.

“That is why we expect the unemployment rate to rise further, reaching at least 7% by the middle of next year.” And that would add about 1 million workers to the claims queue.

David Owen, chief European economist at investment bank Jefferies, said Sunak was “relatively well placed to announce additional tax measures” to deal with “substantial uncertainty as to the current state of affairs”.

Owen sits on the more optimistic end of the spectrum for City analysts, believing the UK has only a short distance to travel to catch up to the level of economic output reached before the virus hits. But he accepts that official figures show that business activity has reversed in recent weeks.

It is this reversal that the Chancellor seeks to stop. The bet seems to be that he will have to devote more resources to his winter plan to avoid a deeper downturn.


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