Mass layoffs about to hit Europe
Companies prepare to carry out sweeping downsizing amid crisis.
At BP, 10,000 jobs. At Lufthansa, 22,000. At Renault, 14,600.
When European countries ordered businesses to shutter and employees to stay home as the coronavirus spread, governments took radical steps to shield workers from the prospect of mass joblessness, extending billions to businesses to keep people employed.
The layoffs are coming anyway. A tsunami of job cuts is about to hit Europe as companies prepare to carry out sweeping downsizing plans to offset a collapse in business from the outbreak. Government-backed furlough schemes that have helped keep around onethird of Europe’s workforce financially secure are set to unwind in the coming months.
As many as 59 million jobs are at risk of cuts in hours or pay, temporary furloughs, or permanent layoffs, especially in industries like transportation and retail, according to a study by McKinsey & Co.
Governments are warning that millions will soon lose paychecks, and the European Central Bank last week said unemployment was likely to surge and stay high even when a recovery from the pandemic unfolds.
“Europe has been successful at dampening the initial effects of the crisis,” said John Hurley, senior research manager at Eurofound, the research arm of the European Union. “But in all likelihood, unemployment is going to come home to roost, especially when the generous furlough programs start to ease off,” he said.
“There’s going to be a shakeout,” he added, “and it’s going to be fairly ugly.”
Compared with the United States, which lost more than 20 million jobs in April alone, the furlough programs in the EU have prevented unemployment from going off the charts. Germany, France, Denmark and Britain are among countries that have employed so-called short-work schemes, effectively nationalizing the paychecks of about 60 million private-sector employees.
But even before a recent resurgence of coronavirus cases, the pandemic’s economic damage was growing, and it now appears those expensive government programs only postponed the pain for some workers. Corporate giants and retail companies operating well below capacity since the start of the crisis will now pivot to slashing tens of thousands of positions in autumn and through next year. Some companies figure the disruption is the best time to move forward on long-contemplated downsizing.