Mass unemployment feared despite Rishi Sunak’s ‘plan for jobs’

8 July 2020 | Finance

Rishi Sunak has been warned he will need to act far more decisively to prevent mass unemployment this autumn after unveiling a £30bn mini budget designed to tempt nervous consumers out their Covid-19 hibernation.

The chancellor announced a short-term cut in VAT for hospitality and tourism and an August “eat out to help out” discount scheme as the government sought to send out a message to the public that it was safe to leave their homes and enjoy themselves.

Stressing that the country faced hardship ahead, he announced measures to revive the housing market with a nine-month stamp duty holiday – raising the threshold in England and Northern Ireland to £500,000 – as well as creating subsidised jobs for young people and providing targeted support for the sectors hit hardest by the lockdown.

Sunak was applauded by Conservative MPs in the Commons as he offered a £10-a-head discount eating out at restaurants and cut VAT from 20% to 5% for hospitality and tourism – including accommodation and meals.

But economic experts, trade unions and Labour questioned whether his “plan for jobs” had done enough to tackle the looming crisis and criticised the decision to phase out the furlough scheme in October.

Sunak said extending the wage support programme, which is covering the pay of 9.4 million furloughed workers, would provide people with false hope. Instead of providing continued state financing of 80% of wages up to a monthly maximum of £2,500, he told firms they would receive a £1,000 bonus for every furloughed worker taken on until next January.

Len McCluskey, the general secretary of the Unite union, said: “Redundancy notices are already flying around like confetti, so today was the day we needed the chancellor to put a stop to this with policies as bold and as necessary as the jobs retention scheme.

“This statement failed that test. With no modification to the JRS, that dreaded October cliff edge for businesses and workers has now been set in stone. Our fear is the summer jobs loss tsunami we have been pleading with the government to avoid will now surely only gather pace.”

The Organisation for Economic Co-operation and Development, a Paris-based thinktank, warned on Tuesday that the number of unemployed people in Britain could increase to almost 15% of the working population, from 3.9%, if the country experiences a second wave of the coronavirus pandemic.

Garry Young, a deputy director of the National Institute for Economic and Social Research, said: “The new measures look to be badly timed and could precipitate a rapid increase in unemployment.

“The incentives offered to employers look too small to be effective. Many employers have been topping up the pay of furloughed workers and are expected to bear more of the cost of the scheme from next month. They will be reluctant to do this now they know that the scheme won’t be extended.”

The Institute for Fiscal Studies thinktank said the money earmarked in Sunak’s summer statement brought the total government support to £190bn since the start of the crisis. Borrowing in the 2020-21 financial year was likely to exceed £300bn – comfortably the highest as a share of income since the second world war.

Sunak told MPs that further steps would be needed in his autumn budget: “We haven’t done everything we have so far just to step back now and say, ‘job done’. In truth, the job has only just begun.”

Business leaders were also underwhelmed by the package. Jonathan Geldart, the director general of the Institute of Directors, a leading employers’ group, said: “The chancellor pulled a few rabbits out of his hat today, but many directors will feel like he missed a trick. We fully understand the Treasury’s desire to focus on the young, and particularly badly affected sectors, but coronavirus has crippled many parts of the economy.”

Sunak told MPs he believed in “the nobility of work”, and “the inspiring power of opportunity”, but even some Conservatives were sceptical about whether the “retention bonus” would be enough to prevent layoffs.

Ryan Shorthouse, a director of the liberal conservative thinktank Bright Blue, said: “It seems unlikely that a £1,000 payment to employers for retaining each furloughed employee will be a strong enough incentive to keep people on the payroll.”

Key points from Rishi Sunak’s plan to boost the UK economy – video

The Treasury’s package of cuts in VAT and stamp duty together with a job creation scheme for young workers was broadly in line with the measures announced by the last Labour chancellor, Alastair Darling, at the height of the global financial crisis in 2008. Sunak made clear to MPs that the cost to the economy from Covid-19 had been much greater, with a 25% drop in output in March and April wiping out the growth of the previous 18 years.

Under the “eat out to help out” scheme, consumers will be able to get 50% off their bill up to a maximum of £10 a head once a week from Mondays to Wednesdays in August and applies to restaurants, cafes and pubs that sign up. Sunak said it was an inducement to help safeguard 1.8m jobs by getting “customers back into restaurants, cafes and pubs”.

But the shadow chancellor, Annaliese Dodds, said the creation of an effective coronavirus test, trace and isolate system would have been far better in reassuring the public it was safe to emerge from lockdown.

“Despite all its talk, the government has failed to create a fully functioning ‘test, track and isolate’ system. This has damaged public confidence and in turn harmed consumer demand,” she said.

The chancellor was also criticised for his blasé approach to the risks of contracting coronavirus, as he encouraged the public to return to pubs and restaurants with an eating out discount.

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Major UK job cuts announced so far

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The coronavirus lockdown has prompted some of the UK’s most prominent companies to announce large-scale job losses. The aviation, automotive and retail sectors have been among the worst hit, as businesses adjust to dramatically reduced revenue projections.

While the government’s job retention scheme has so far protected millions of jobs, fears are mounting that unemployment will rise as the scheme begins to be phased out from August.

Since lockdown began on 23 March, some of the UK’s largest companies have announced plans to cut a total of 60,000 jobs globally, many of which will fall in the UK.

Rolls-Royce – 9,000 jobs
The jet-engine manufacturer has confirmed that 3,000 job cuts, of a planned 9,000 worldwide, will be made in the UK. In May Rolls-Royce said it would make the first round of redundancies through a voluntary programme, with about 1,500 posts being lost at its headquarters in Derby, as well as 700 redundancies in Inchinnan, near Glasgow, another 200 at its Barnoldswick site in Lancashire, and 175 in Solihull, Warwickshire.

BP- 10,000 jobs
The oil company said in June it plans to make 10,000 people redundant worldwide, including an estimated 2,000 in the UK, by the end of the year. The BP chief executive, Bernard Looney, said that the majority of people affected would be those in office-based jobs, including at the most senior levels. BP said it would reduce the number of group leaders by a third, and protect the “frontline” of the company, in its operations.

Centrica- 5,000 jobs
The owner of British Gas announced in June that it intends to cut 5,000 jobs, mostly senior roles, and remove three layers of management, in a bid to simplify the structure of its business. The energy firm has a total workforce of 27,000, of whom 20,000 are in the UK.

Bentley- 1,000 jobs
The luxury carmaker intends to shrink its workforce by almost a quarter, slashing 1,000 roles through a voluntary redundancy scheme. The majority of Bentley’s 4,200 workers are based in Crewe in Cheshire.

Aston Martin Lagonda – 500 jobs
The Warwickshire-based luxury car manufacturer has announced 500 redundancies.

British Airways – 12,000 jobs
The UK flag carrier is holding consultations to make up to 12,000 of its staff redundant, a reduction of one in four jobs at the airline. BA intends to cut roles among its cabin crew, pilots and ground staff, while significantly reducing its operations at Gatwick airport.

Virgin Atlantic – 3,000-plus jobs
Richard Branson’s airline is to cut more than 3,000 jobs, more than a third of its workforce, and will shut its operations at Gatwick.

EasyJet – 4,500 jobs
The airline has announced plans to cut 4,500 employees, or 30% of its workforce.

Ryanair – 3,000 jobs
The Irish airline intends to slash 3,000 roles and reduce staff pay by up to a fifth.

Aer Lingus – 900 jobs
The Irish airline, part of International Airlines Group (IAG) plans to cut 900 jobs.

P&O Ferries – 1,100 jobs
The shipping firm intends to cut more than a quarter of its workforce, a loss of 1,100 jobs. The company, which operates passenger ferries between Dover and Calais, and across the Irish Sea, as well as Hull to Rotterdam and Zeebrugge, will initially offer employees voluntary redundancy.

JCB – 950 jobs
Digger maker JCB said in May up to 950 jobs are at risk after demand for its machines halved due to the coronavirus shutdown.

Ovo Energy – 2,600 jobs
Britain’s second biggest energy supplier announced in May it planned to cut 2,600 jobs and close offices after the lockdown saw more of its customer service move online.

Johnson Matthey – 2,500 jobs
The chemicals company said in June it is planning to make 2,500 redundancies worldwide over the next three years. The move will affect 17% of the workforce at the firm, which is a major supplier of material for catalytic converters.

Bombardier – 600 jobs
The Canadian plane maker will cut 600 jobs in Northern Ireland, as part of 2,500 redundancies announced in June.

The Restaurant Group – 1,500 jobs
The owner of Tex-Mex dining chain Chiquito, and other brands including Wagamama and Frankie & Benny’s, said in March that most branches of Chiquito and all 11 of its Food & Fuel pubs would not reopen after the lockdown, leading to the loss of 1,500 jobs.

Monsoon Accessorize – 345 jobs
The fashion brands were bought out of administration by their founder, Peter Simon, in June, in a deal which saw 35 stores close permanently and led to the loss of 545 jobs.

Clarks – 900 jobs
Clarks plans to cut 900 office jobs worldwide as part of a wider turnaround strategy

Oasis and Warehouse – 1,800 jobs
The fashion brands were bought out of administration by restructuring firm Hilco in April, in a deal which led to the permanently closure of all of their stores and the loss of more than 1,800 jobs.

Debenhams – 4,000 jobs
At least 4,000 jobs will be lost at Debenhams as a result of restructuring, following its collapse into administration in April, for the second time in a year.

Mulberry – 470 jobs
The luxury fashion and accessories brand said in June it is to cut 25% of its global workforce and has started a consultation with the 470 staff at risk.

Jaguar Land Rover – 1,100 jobs
The car firm is to cut 1,100 contract workers at manufacturing plants the UK, potentially affecting factories at Halewood on Merseyside and Solihull and Castle Bromwich in the West Midlands.

Travis Perkins – 2,500 jobs
The builders’ merchant is cutting 2,500 jobs in the UK, accounting for almost a 10th of its 30,000-strong workforce. The company, which is behind DIY retailer Wickes and Toolstation, said the job losses will affect staff in areas including distribution, administrative roles and sales. The move will also affect staff across 165 stores that are now earmarked for closure.

Swissport – 4,500 jobs
Swissport, which handles services such as passenger baggage and cargo for airlines has began a consultation process that is expected to result in 4,556 workers being made redundant, more than half of its 8,500 UK workforce.

Royal Mail – 2,000 jobs
Royal Mail has announced a cost-cutting plan that will involve slashing about 2,000 jobs. One in five of its near-10,000 management roles will go by March 2021, in areas including IT, finance, marketing and sales. The company’s 90,000 postal workers would not be affected by the cuts.

SSP Group – 5,000 jobs
The owner of Upper Crust and Caffè Ritazza is to axe 5,000 jobs, which represents about half of its workforce. The cuts will have an impact on staff at its head office and across its UK operations. It follows a dramatic fall in domestic and international travel, which has hit the company’s sites based at railway stations and airports.

Accenture – 900 jobs 
The consultancy firm is reduces costs in the face of lower demand for its services. The New York-listed company employs 11,000 people in offices across the UK including in Aberdeen, London and Cambridge. The UK job cuts will be at all levels, including managing directors, and across all parts of the business.

Harrods – 700 jobs
The department store group is cutting one in seven of its 4,800 employees due to the “ongoing impacts” of the pandemic. The Harrods chief executive, Michael Ward, blamed the cuts on social distancing and a lack of tourists.

Airbus – 1,700 jobs
The European planemaker announced plans this week to cut 1,700 jobs in the UK as it warned the coronavirus pandemic had triggered the “gravest crisis” in its history.

Photograph: Bloomberg

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Sunak was filmed serving customers in a London branch of food chain Wagamama, without wearing a face covering, and insisted in his speech: “We would not have lifted the restrictions if we did not think we could do so safely.”

Martin McKee, professor of European public health at the London School of Hygiene and Tropical Medicine, said: “The chancellor has, entirely understandably, prioritised support for the hospitality industry given how hard it has been hit. However, as the experience in other countries, most notably some US states and Israel, shows, there is a need for great caution.

“The risks are far greater indoors so, where possible, I would encourage people to eat al fresco, taking advantage of the summer weather. Personally, I would be very cautious about mixing with people without face coverings indoors until the level of circulating virus is much lower.”

This post has originally been featured in Guardian.