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
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.