November 26, 2020

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U.K. Spending on Supporting Jobs Surpasses 50 Billion Pounds

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(Bloomberg) — The cost of the U.K.’s wage subsidies for workers has surpassed 50 billion...

(Bloomberg) — The cost of the U.K.’s wage subsidies for workers has surpassed 50 billion pounds ($64 billion), according to figures published on Tuesday that lay bare the economic fallout from the coronavirus pandemic.

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The government’s flagship furlough program — due to end on Oct. 31 — has received claims totaling 39.3 billion pounds, according to data released by the government’s tax authority, Her Majesty’s Revenue and Customs. Help for the self-employed totaled 13.4 billion pounds, bringing total spending on supporting workers to 52.7 billion pounds.

The numbers highlight the extent to which a large swath of the workforce has become reliant on government support as coronavirus restrictions continue to weigh on efforts to reopen the economy.

Data earlier this month showed that a tenth of U.K. employees were still relying on the furlough program. While that’s down from 30% at the height of the pandemic, economists have warned of a wave of unemployment when it ends next month.



a screenshot of a cell phone: Stubbornly High


© Bloomberg
Stubbornly High

With the number of new cases of the virus on the rise, the government has advised people to work from home if they can, reversing earlier efforts to encourage them back to their workplaces. From Thursday, hospitality venues across England will be required to close by 10 p.m. and to limit transactions to table service, a blow to one of the hardest-hit sectors of the economy.

Furlough End

Chancellor of the Exchequer Rishi Sunak has come under increasing pressure from opposition parties, businesses and unions to extend wage support beyond the end of the furlough program next month as persistent restrictions on economic activity continue to take their toll on the economy.

While he’s held firm on ending furlough, a week ago the chancellor hinted at further support, saying he will continue to be “creative” to support jobs and employment.

Bank of England Governor Andrew Bailey weighed into the debate Tuesday, saying that he supports ending the current furlough program in favor of more targeted support, although he doesn’t wish to tie Sunak’s hands by making recommendations.

“We’ve moved from a world of generalized employment protection to more specifically focused areas,” he said on a webinar. “It is therefore sensible to stop and rethink the approach going forwards.”

Separate figures from the Treasury showed that banks have extended more than 57 billion pounds of government-backed loans to businesses under three programs: the Coronavirus Business Interruption Loan Scheme, or CBILS; its equivalent for larger companies, CLBILS; and the Bounceback Loan Scheme, or BBLS. Loans provided by the first two programs are 80% state backed, while the bounceback loans have a 100% government guarantee.

PlanUsageCost (Pounds)
Coronavirus Job Retention Scheme 9.6 million jobs 39.3 billion
Self-employment Income Support 4.9 million claims (over 2 tranches) 13.4 billion
Bounce Back Loan Scheme 1,260, 940 loans 38.02 billion
Coronavirus Business Interruption Loan Scheme

66,585

loans

15.45 billion
Coronavirus Large Business Interruption Loan Scheme 566 loans 3.84 billion

(Adds chart, Bailey comments in eighth paragraph.)

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©2020 Bloomberg L.P.

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