Chancellor of the Exchequer Rishi Sunak is examining ways to move millions of workers off government support and back into their jobs as the U.K. leaves its lockdown.
In March, as the U.K. went into lockdown to slow the spread of coronavirus, Sunak announced a furlough program where workers received 80% of their wage to stay home.
It’s now supporting more than 6.3 million people at a cost of billions of pounds, and the chancellor has to find a way to ease them off it. Amid the debate about how to wind down aid, the British Chambers of Commerce said Wednesday that most U.K. businesses could be up and running days after restrictions are lifted, with smaller firms primed to return the quickest.
A government official said Sunak was working through policy options this week, with no decisions taken and everything still on the table.
Options reported in newspapers include reducing the subsidy to 60%, to encourage people to go back to work, and allowing people to work while receiving a smaller subsidy, possibly as a way of helping businesses restart slowly.
Getting the exit from the plan right is crucial if the U.K. is to avoid worsening an already perilous employment situation. The Resolution Foundation warned Wednesday that the crisis could see youth unemployment spike by 600,000 this year, taking it above 1 million.
{{/usCountry}}Getting the exit from the plan right is crucial if the U.K. is to avoid worsening an already perilous employment situation. The Resolution Foundation warned Wednesday that the crisis could see youth unemployment spike by 600,000 this year, taking it above 1 million.
{{/usCountry}}Expensive Support
The government support for jobs is expected to cost 39 billion pounds ($48 billion). If it runs too long, it will cost more. But if Sunak ends it too abruptly, businesses short of money may have to lay off staff, negating the point of the program.
More than 800,000 employers are using the program, and he has promised there will be no cliff edge end to the support. BCC Director General Adam Marshall echoed that sentiment in an interview with Bloomberg TV on Wednesday.
“Firms are going to have to have access to it for some time to come because not every business can open at the same pace,” he said. “We caution against just breaking it down by sector because if you withdrew support from some firms that are in the supply chains of these businesses but kept support to others, you could see some supply chains collapse.”
According to the BCC survey, almost two-thirds of companies with fewer than 10 employees and half of large businesses said they could be ready within a week.
The poll, conducted April 29-May 1 found, suggests commerce could ramp up fairly quickly following the lifting of the lockdown, although questions remain about how businesses will be impacted by continued social distancing rules.
The timing of any easing is still uncertain. A decision on whether to extend the lockdown is due this week, with every indication that Prime Minister Boris Johnson will say the closures of schools and most shops needs to continue. But he is likely to set out a pathway back to normality, once scientists are sure that coronavirus can be kept under control.