Chancellor of the Exchequer Rishi Sunak leaves 10 Downing Street after attending a Cabinet meeting on 14 February, 2020.
U.K. Finance Minister Rishi Sunak has announced a new emergency package of measures to contain unemployment, replacing the country’s furlough scheme which is due to expire next month.
The Jobs Support Scheme will directly top up the wages of employees working fewer hours due to suppressed business demand, enabling workers to keep their jobs on shorter hours rather than being made redundant. It will run for six months from November.
Employees must work at least one-third of their normal hours and be paid for that work as normal, but the government will increase wages covering the remaining two-thirds of the pay. The scheme will target all small and medium-sized businesses across the U.K., though larger companies may be eligible if they have experienced a fall in turnover during the crisis.
“I can’t save every business, I can’t save every job, no Chancellor (of the Exchequer) could, but what we can and must do is deal with the real problems that businesses and employees are facing now,” Sunak told the House of Commons on Thursday.
The furlough scheme has subsidized 80% of wages for millions of workers furloughed as a result of the pandemic, but Sunak confirmed in July that it would be wound down as the country began to emerge from lockdown measures, instead offering businesses a bonus program for bringing furloughed employees back to work.
However, with many of those workers having been employed by the hospitality industry and the government now being forced to reintroduce some restrictions due to a spike in Covid-19 infections, economists have warned that the country could face a significant surge in unemployment in the fourth quarter.
Employers retaining furloughed staff on shorter hours can now claim both the Jobs Support Scheme and the Jobs Retention Bonus.
Earlier this week, Prime Minister Boris Johnson announced a 10 p.m. curfew for hospitality venues in a bid to contain the spread of the virus. The U.K. reported 6,178 cases on Wednesday, up by 1,252 since Tuesday and taking its total confirmed cases past 412,000.
Just last week, the Bank of England gave its first indication that negative interest rates could be under consideration as it looks to play its part in shoring up the economy against the fallout from the pandemic, with GDP having plunged by a record 20.4% in the second quarter.
“The financial markets have largely welcomed Chancellor Sunak’s speech, sparking a short surge in trading activity,” said Giles Coghlan, chief currency analyst at HYCM.
“However, this will likely be short lived, and I anticipate a general retreat to safe haven assets and cash savings as investors look to hedge against market uncertainty.”