3m jobs at risk as Covid debt swamps firms

Num­bers un­der threat com­pa­ra­ble to wip­ing out all roles in West Mid­lands, claims high-level re­port

The Daily Telegraph - Business - - Business - By Lucy Bur­ton and Tim Wal­lace

A QUAR­TER of a mil­lion firms have taken on so much debt to sur­vive the coro­n­avirus cri­sis that they could be crushed by the weight of loans in the com­ing months, putting up to 3m jobs at risk un­less rad­i­cal ac­tion is taken, fi­nanciers have warned.

The roles un­der threat are equiv­a­lent to wip­ing out more than all the jobs in the West Mid­lands.

In a 144-page re­port be­ing sent to the Trea­sury and the Bank of Eng­land to­day, fi­nanciers in­clud­ing Lord Blackwell, out­go­ing Lloyds chair­man and Sir John King­man, Le­gal & Gen­eral chair­man, said that debt-laden firms should be able to con­vert their coro­n­avirus loans into new prod­ucts so that they can pay the debt back with­out be­ing forced into bank­ruptcy. They want a “Re­cov­ery Cor­po­ra­tion” to turn toxic debts into tax obli­ga­tions, and take pri­vate sec­tor in­vest­ment to grad­u­ally re­duce the Gov­ern­ment’s ex­po­sure.

“Fail­ure to act de­ci­sively now will con­demn many SMEs and com­mu­ni­ties across the na­tion to de­fault and de­cline,” said Sir Adrian Mon­tague, Aviva’s for­mer chair­man who led the re­port on be­half of TheCi­tyUK.

High street banks have doled out bil­lions in emer­gency loans to prop up small com­pa­nies dur­ing the cri­sis, sup­ported by a tax­payer guar­an­tee to cover de­faults. How­ever, the cur­rent rules re­quire banks to vig­or­ously pur­sue the debt be­fore turn­ing to White­hall for what they are owed.

Three-quar­ters of un­sus­tain­able debts fac­ing small busi­nesses from Covid-19 loans, equal to £25bn, are from out­side Lon­don, threat­en­ing the Gov­ern­ment’s “lev­el­ling up” agenda.

Even be­fore this debt hits, the jobs cri­sis is hit­ting hard­est in the north of Eng­land, ac­cord­ing to anal­y­sis by the Cen­tre for Cities. It found that there are 50pc more ap­pli­cants per job in the Mid­lands and North than there are in Lon­don and the South East.

To­day’s of­fi­cial jobs num­bers are ex­pected to show a mod­est rise in un­em­ploy­ment, stay­ing close to the multi-decade low of be­low 4pc recorded at the start of the year.

How­ever, economists at the Res­o­lu­tion Foun­da­tion warned the “true” fig­ure could be far higher, as the of­fi­cial num­ber does not in­clude peo­ple who classed as “in­ac­tive”. It found that just 55pc of adults were work­ing dur­ing the lock­down. The usual rate is 70pc. Even those who re­main in work will find their jobs changed, ac­cord­ing to the Char­tered In­sti­tute of Per­son­nel and De­vel­op­ment. It ex­pects the num­ber of peo­ple who work from home to more than dou­ble to al­most four in 10.

Those who start work­ing for them­selves may have the best bal­ance, a study from the In­sti­tute for Fis­cal Stud­ies in­di­cates. Earn­ings typ­i­cally fall by 30pc, or £500 per month, when work­ers choose to go it alone, but their over­all well-be­ing and life sat­is­fac­tion rises.

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.