Sunak steps in to keep wages paid and tells businesses: do not fire staff
Chancellor pledges to cover 80pc of salary for every employee unable to work while Britain is on lockdown during the crisis
Tim Wallace, Alan Tovey
Laura Onita
RISHI SUNAK pleaded with firms not to fire their staff yesterday as he unveiled an unprecedented package of economic support that may have saved a million jobs.
The Chancellor pledged to step in to cover 80pc of the wage bill for every employee unable to work while Britain is on lockdown during the coronavirus pandemic – allowing hundreds of companies to avoid mass redundancies. The maximum payment per worker will be £2,500 a month.
Addressing business chiefs as he unveiled the massive wage subsidy, Mr Sunak said: “Please look very carefully at that support before making decisions to lay people off. It’s on all of us.”
He added that despite the intervention, many thousands of people are still likely to be made redundant.
Mr Sunak’s rescue bid amounts to the biggest intervention in the private sector since the Second World War. It was cheered by business leaders across the country and had an instant effect on bosses planning lay-offs.
Sir Philip Green’s retail empire including Topshop and Dorothy Perkins closed all its stores indefinitely yesterday afternoon and said it would review how many staff to keep on after paying March’s wages. But after the Chancellor’s announcement, sources close to the firm said it is now likely to keep most workers in employment.
Administered by HMRC, the scheme will have unlimited funds, with the payouts expected within weeks.
Paul Johnson, of the Institute for Fiscal Studies, estimated for taxpayers to cover the wage bill of 10pc of employees, will cost £10bn over three months.
The move forms part of a major package intended to keep the economy ticking over while it is essentially mothballed due to mass quarantines.
Mr Sunak also revealed a £30bn pledge to postpone all VAT payments for three months to ease the pressure on cash flow, and vowed to hike universal credit and working tax credit.
Rooney Anand, chairman of the Casual Dining Group – which employs 8,000 people and runs brands including Bella Italia and Cafe Rouge – said:
“This will make a big difference to us all. However, the vast majority of restaurants and pubs can’t afford to stay shut for an extended period. It is crucial that we are allowed to open again as soon as it is prudent to do so.”
The move is retrospective, so anyone laid off since the start of March is eligible for the money if their employer takes them back on to their books.
Manufacturers hailed the move as crucial respite following a wave of plant closures triggered by a collapse in demand due to the pandemic.
Warren East, chief of Rolls-royce, said: “We warmly welcome the decisive action taken by the Government to help companies safeguard British jobs at this very challenging time.”
Simon Peckham, chief executive of engineering company Melrose, said: “I think it will save jobs.”
Christopher Nieper at textiles company David Nieper, which employs 300 people, said: “It’s an astonishing move. We put our staff on a four-day week to share the pain and this is the sort of support that’s needed. It will keep the pub, club and café sector alive.”
Economists, business groups and the Trades Union Congress all said the plans will make a huge difference.
Gerard Lyons, Boris Johnson’s former economic adviser, said: “Congratulations to the Chancellor for continuing to respond to the ever-developing crisis with a significant policy response aimed at safeguarding jobs.
“There are still gaps in the approach; and it will mitigate, not fully remove, the hit to the economy, but he should be congratulated for what he is doing.”
The scheme’s success will depend on HMRC being able to process the claims rapidly before companies run out of cash. The scheme is expected to be up and running by the end of April.
That is because bills are looming, even as revenues evaporate.
Richard Hodgson, boss of restaurant chain Yo!, said: “The elephant in the room remains the impending rent payments due for the next quarter. How can we be expected to pay rent when we cannot trade the sites?”
One option is that banks, flush with cheap cash pumped in by the Bank of England, will help small businesses bridge the gap.
The country’s five million-strong self-employed workforce will get a package of tax breaks, but Mike Cherry of the Federation of Small Businesses said further measures will be needed.
He said: “Over the coming days, we need to see the Chancellor map out how he will directly support the selfemployed in the same way as he has committed to support employees.” their own staff are either becoming ill or are unable to come in because they have family commitments or are caring for vulnerable people.
The hiring spree is a rare economic bright spot as thousands of non-food retail and hospitality workers face job losses due to a footfall slump as millions of people stay at home.
Aldi, Asda and Lidl said yesterday that they are seeking to hire 9,000, 5,000 and 2,500 people respectively, after similar announcements from Morrisons and Co-op. Chains have long prepared for a pandemic and are starting contingency measures in a bid to ensure their networks hold up.
Anecdotally there are also signs that stockpiling has eased off a little. Supermarkets have been simplifying their ranges to ensure they remain stocked with staples such as bread.
Meanwhile, Marks & Spencer’s turnaround plan has been derailed by coronavirus, with its ailing clothing and home arm severely impacted by the outbreak. The retailer has torn up all guidance on future profits and will axe its final dividend to shareholders, saving £130m.