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The U.K. government has stepped in to help pay people’s wages in an unprecedented move amid the deepening coronavirus crisis.
Rishi Sunak, the Chancellor of the Exchequer, said the government would pay 80% of the salaries of workers furloughed due to the pandemic – up to £2,500 a month, with the option for employers to top that up.
Sunak, a former Goldman Sachs banker, said that “unlimited funding” would be available for the workers scheme. It is an “unprecedented economic intervention to support the jobs and incomes of the British people. Unprecedented measures for unprecedented times,” he said.
Prime Minister Boris Johnson also ramped up the nation’s response to the outbreak, telling pubs, bars, restaurants, cafes, nightclubs, theaters, cinemas and gyms to close tonight and not open tomorrow. It comes as the U.K. death toll rose to 184
The ‘Coronavirus Job Retention’ scheme will be backdated to March 1 and last for an initial three months, but could be extended.
Denmark implemented a similar plan earlier this week, offering to pay 75% of employee wages at any firm impacted by the virus for a three-month period – as long as those companies pay the remaining 25% and don’t lay off any staff.
In order to address short-term cash flows problems met by businesses across the country, VAT payments for the next quarter will also be deferred.
Dame Carolyn Fairbairn, director-general, of the Confederation of British Industry, the UK business trade body, said the “landmark package” marked the start of the U.K.’s economic fightback. “The Chancellor’s offer of substantial payroll support, fast access to cash and tax deferral will support the livelihoods of millions. Firms and employees will respond with relief and determination… An important day for our country.”
Small businesses also welcomed Sunak’s historic measures.
Asit Haria, owner of Coombe Stationers and Printers, a small family-run stationery and printing business set up in south west London in 1988, said: “I think it’s really good what he has done, it’s very comprehensive and good for retail because it covers 80% of wages and most employers were prepared to pay up to 50% to maintain continuity.
Haria’s business, which is located next door to a Chemist run by his brother, relies on the bulk of its business from companies, restaurants and schools, printing brochures, leaflets, menus and letter headed notepaper.
“The print side is dead,” he said. “It dropped off a cliff. But we are benefitting from parents buying pads, pens and paper for their children who are now studying at home.”
It is the third time in just nine days the chancellor has unveiled a major raft of measures to support the economy from the growing threat of coronavirus. In the Budget last week Sunak announced a £30 billion package supporting the National Health Service (NHS) and other public services, and measures to relax business rates tax and safeguard sick pay.
On Monday, as coronavirus continued to spread across the U.K., the UK finance chief announced a £350 billion package of loans, tax cuts and grants to protect businesses and employees, including £330 billion in government-backed loans for businesses — equivalent to 15% of GDP. The entire hospitality and retail sectors was also given a year-long business rates holiday.
The hospitality sector has been particularly hit this week as people opt to stay indoors, following government advice. Pub chain Wetherspoons JDW, +25.11% said on Friday it had already felt the impact of Johnson’s advice. The British Beer and Pub Association urged the government to underwrite 75% of wages across the industry to prevent thousands of pubs from closing. The trade body welcomed the initial relief but said they failed to address the immediate cash flow measures facing the industry.
