Millions of UK jobs at risk owing to virus shutdown

Millions of jobs are at risk in sectors exposed to the UK’s shutdown of social activities with more than 200,000 people working in the leisure and hospitality sectors having been laid off since mid-February.

About a quarter of the UK’s workforce is employed in sectors where demand has shrunk due to the government instructions to minimise social contact because of coronavirus. About 5m people work in retail, 2.5m in accommodation and food services, and more than 1m in arts, entertainment and recreation, with another 1m in other service activities, many consumer-facing.

“Our analysis suggests in excess of 1m jobs are now on the line,” said Kate Nicholls, chief executive of trade body UKHospitality. “Job cuts are extraordinarily deep and they are happening now. What the sector urgently needs is a package of support and funding to keep people in employment. This needs to happen now — within 24 hours.”

The British Beer and Pub Association agreed. “The government literally has 24 hours to put together a pub-specific package to prevent irreversible closures and job losses.”

The rescue package laid out by chancellor Rishi Sunak on Tuesday centred on a pledge of unlimited government guaranteed loans and included extra help for the most exposed sectors in the form of business rates holidays and cash grants. But direct support for individuals has so far been limited to the enhancement of statutory sick pay announced in last week’s Budget.

Speaking to the House of Commons Treasury committee on Wednesday, the chancellor recognised he would have to do more to support businesses’ cash flows to “preserve employment and productive capacity in the economy”. He suggested that less targeted measures might be coming soon to do this, perhaps delivered though the national insurance system.

“As the scale of what we’re grappling with increases, we are left looking at more macroeconomic, economy-wide solutions than targeted solutions anyway,” Mr Sunak said.

Paul Johnson, director of the Institute for Fiscal Studies think-tank, said the latest measures were substantial but not targeted at saving jobs. “It will remain as expensive to pay people, and if demand is down then jobs are likely to go,” he said.

Many smaller businesses said the measures announced on Tuesday would not be enough for them to stay open. Just an hour after the chancellor finished speaking, the steak chain Hawksmoor said it would close, with many staff losing their jobs, following similar announcements from rivals.

Jonathan Downey, co-founder of London Union, which runs event spaces and street food venues in the capital, has closed all his venues and laid off 85 per cent of staff, all part-time workers. The rest are on three-quarters of their usual salaries. London hoteliers are closing properties, putting staff on unpaid leave or two-day weeks and axing contract workers.

Many workers in these relatively low-paying sectors are especially vulnerable. In retail and hospitality, there is a high rate of churn — meaning that many have not been employed for long enough to qualify for jobseekers’ allowance and could only claim benefits through universal credit, which has a five-week wait for the first payment. In food services, arts, entertainment and other areas of leisure, there are high rates of self-employment.

But the risks of job losses and big falls in incomes stretch far more widely. The consultancy Pantheon Macroeconomics estimated that 2m workers — 6 per cent of the total workforce — would need to stop working on any one day to look after children if schools closed.

Many people in higher-earning brackets could still find it difficult to meet rent payments in areas with high housing costs if they were forced to take unpaid leave for extended periods.

Mr Sunak this week promised “significant, direct fiscal action” within days to support jobs and incomes. He said he would work with trade unions and business groups “to urgently develop new forms of employment support”, looking at models from other countries to find ways to help businesses meet the fixed costs of staffing without having to make people redundant.

That suggests the chancellor is looking at schemes such as those adopted in Denmark — where the state has offered to cover 75 per cent of wage costs for companies hit by a big drop in demand — or Germany’s Kurzarbeit scheme, which gives state support to companies that put workers on shorter hours rather than laying them off.

But Mr Sunak warned it would not be possible to introduce entirely new support schemes quickly. “We can’t reinvent from scratch. We have to work with what we’ve got . . . but be ambitious,” he said.

The Trades Union Congress has called on the government to follow the examples set by Denmark, Sweden and Germany. Others on the left go further, with renewed calls for a universal basic income.

Peter Cheese, chief executive of the CIPD, the human resources trade body, called on the government to create a wage subsidy fund, payable to employers, to lower the risk of redundancies.

But Torsten Bell, director of the Resolution Foundation think-tank, told the House of Commons Treasury committee this week that the priority should be to make the welfare system more generous.

’ allowance currently pays a maximum of £73.10 a week. The weekly maximum is the same for people who are ineligible for jobseekers’ allowance and claim through universal credit — but they would also be subject to means-testing, with the result they might not qualify if they had a partner still earning.

Mr Bell said there might be ways to use the existing statutory sick pay mechanism to support jobs, by channelling state payments to people who would then stay attached to their employer. But he cautioned: “We need to be very realistic about what can be done in time . . . Do not think we can quickly put in place a whole new system.”

Finding ways to step up support for individuals rapidly will be crucial to limiting the economic fallout of the measures required to contain the virus.

Martin Beck, at the consultancy Oxford Economics, said: “The key risk facing the economy is a downward spiral of job losses, corporate liquidations and ever lower consumption hurting the ability of the economy’s supply side to rebound when demand and spending recover.”

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