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» » Britain Offers a Plan for Jobs, but Braces for a Wave of Layoffs - The New York Times

Britain Offers a Plan for Jobs, but Braces for a Wave of Layoffs - The New York Times

Inside the British government’s 30 billion pound ($37.8 billion) plan to “protect, support and create jobs” in the wake of the pandemic, there are signs the leadership has already conceded that sweeping layoffs are inevitable.

Rishi Sunak, chancellor of the Exchequer, said this week that nearly a billion pounds would be spent hiring a small army of “work coaches” to help the newly unemployed, while he announced new measures to coax people back to work and revive spending in some of the economy’s hardest-hit industries.

Within 24 hours of the announcement, two of the nation’s largest retailers, the pharmacy chain Boots and the department store John Lewis, said they would be cutting more than 5,000 jobs. Over the course of the week, employers announced that as many as 8,450 jobs were slated for redundancy.

The swiftness and scale of the layoffs illustrate the challenge the British government faces as it changes its approach to tackling the economic fallout of the pandemic. Four months ago, the chancellor said he would do “whatever it takes” to see the British economy through the worst of the crisis. The cost of those programs announced in March is expected to reach £160 billion.

Other countries are in a similar bind. In the United States, additional money for workers laid off during the pandemic ends this month, and the extension of forgivable loans to small business will end in the fall. But the White House and Congress are at odds over how much more support is needed and how soon. In New Zealand, two-thirds of workers have benefited from a wage subsidy program, but Prime Minister Jacinda Ardern said it would end in September ahead of an election. In France, where more than eight million people have benefited from a furlough program, the government is planning to extend the payments for another year or two, the labor minister said.

Credit...Jessica Taylor/Parliament, via Reuters

The British government’s focus is on shifting the spending back to the private sector by reopening business and encouraging the people who saved money while shops, restaurants and other face-to-face services were closed to spend again and drive the economic recovery.

Mr. Sunak, Britain’s chief finance minister, has already started the process of winding down the emergency levels of stimulus from earlier in the year and warned that the scale of job losses ahead would be “significant.” Since March, the Treasury has paid a substantial portion of the wages of 9.4 million workers, but Mr. Sunak was adamant that the program would end in October.

“If you’re asking me can I protect every single job, of course the answer is no,” Mr. Sunak told the BBC on Thursday. “Is unemployment going to rise, are people going to lose their jobs? Yes, and the scale of this is significant. We are entering one of the most severe recessions this country has ever seen.”

By the time the furlough program ends in October, the government plans to have an additional 4,500 work coaches stationed around the country to give unemployed people receiving government benefits one-on-one support to find local jobs. Eventually 13,500 coaches will be hired at an estimated cost of £895 million, doubling the current total. This is even more hiring than in the aftermath of the 2008 financial crisis, when the unemployment rate peaked at 8.5 percent in 2011. Then, job center staff was increased by 10,000.

The Organization for Economic Cooperation and Development warned on Tuesday that even without a second pandemic wave, Britain’s unemployment rate could rise to 11.7 percent by the end of the year, from 3.9 percent.

Credit...Mary Turner for The New York Times

The government has managed to hold back a surge in the unemployment rate, such as the kind seen in the United States and Canada, because more than one million employers have taken part in the furlough program and kept staff on the payroll. But there are concerns the dam could break when the measure is replaced with a one-off £1,000 bonus to employers for each furloughed staff member brought back to work through January.

That proposal is already being questioned, inside and outside of government. Paul Johnson, the director of the Institute for Fiscal Studies, said in a presentation on Thursday that the majority of these bonuses would probably go to companies that would have brought back workers regardless, rather than encouraging employers to bring back even more workers.

And Mr. Sunak had to go through the formal process of issuing a ministerial direction to order the British tax authorities to go ahead with the bonuses after their top civil servant questioned “the value for money” and efficiency of the proposal. The chancellor has acknowledged his coronavirus response has been focused on blunt tools to reach as many people as fast as possible.

For several large employers, deep cuts were already underway. On Monday, Pret a Manger, a big chain of coffee and sandwich shops, announced that it would permanently close 30 locations, a move that the BBC reported would result in the loss of 1,000 jobs. Reach, the publisher of The Daily Mirror and Daily Express newspapers, said on Tuesday that it was laying off 550 people, amounting to 12 percent of its work force.

After Mr. Sunak’s statement in Parliament on Wednesday, the chief executive of Burger King UK said 5 to 10 percent of its restaurants would most likely not survive, leading to between 800 and 1,600 job losses. The next day, Boots said it planned to lay off more than 4,000 people, about 7 percent of its work force, and John Lewis said it would permanently close eight department stores, putting 1,300 jobs at risk.

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The National Institute of Economic and Social Research said the ending of the furlough program, confirmed by the new bonus plan, was badly timed and likely to have the unintended effect of prompting more layoffs.

“It doesn’t motivate employers to wait and see over the next couple of months,” Rory MacQueen, an economist at the institute, said. “This motivates them to make a snap decision early.” Instead, the government should have kept the furlough program open and waited for its costs to go down as people returned to work, he added.

Alongside the thousands of work coaches hired in job centers, Mr. Sunak said £40 million would be provided to finance a new job search support service by the private sector. It will focus on helping people who have been unemployed for less than three months find work.

Credit...Andrew Testa for The New York Times

In response to those who have been underwhelmed by the Treasury’s plans, Mr. Sunak said this was just the second of three phases of economic stimulus, after the spring’s furlough relief. The third part is expected to be introduced in the fall, alongside a comprehensive spending review, another budget and independent forecasts on the economy by the Office for Budget Responsibility. Until then, the government will be watching the pace of the recovery as restrictions on travel and social distancing are relaxed.

Activity is tentatively resuming. The Office for National Statistics said data showed a moderate increase in foot traffic on British high streets, although it remains about half of last year’s level. On Thursday, the government announced more plans to reopen businesses in the coming weeks, including indoor gyms and beauty salons. Travelers from more than 50 countries can now arrive in Britain without entering a two-week quarantine, though those restrictions are still in place for American visitors.

But the leader of one of Britain’s largest unions said businesses and workers would face a cliff’s edge in October.

“Our fear is that the summer jobs loss tsunami we have been pleading with the government to avoid will now surely only gather pace,” Len McCluskey, the general secretary of Unite, said. “This was a statement by a chancellor preparing for mass unemployment.”

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