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Coronavirus: UK government to pay workers' wages as it tells pubs, restaurants, and gyms to close tonight

Lianna Brinded
Head of Yahoo Finance UK
Coronavirus: UK government to pay workers' wages as it tells pubs, restaurants, and gyms to close tonight

The UK chancellor Rishi Sunak has unveiled another set of “unprecedented” financial measures to help protect workers and jobs, including paying up to 80% of workers’ wages in a bid to help businesses mitigate the economic impact of the coronavirus pandemic.

Sunak said at the daily press briefing that the government is rolling out a combination of schemes to make sure workers are protected and businesses can stay afloat during the escalation of social distancing to prevent the spread of Covid-19.

The measures announced on Friday 20 March include:

  • Coronavirus job retention scheme: Companies and organisations, including charitable ones, will be able to apply for a grant from HMRC to cover the wages.

  • Interest-free loans: The coronavirus business interruption loan scheme will be interest free for 12 months (up from 6 months).

  • Wage payments: The UK government will pay up to 80% of workers’ wages for up to £2,500 a month — employers can top this up — in order to keep them on payroll when they aren’t working. It is aimed at preventing companies from laying off staff.

  • VAT payment deferral: No VAT payments from now until the end of June. They will have until the end of the financial year to repay those bills. Sunak claims that this will have a £30bn ($35bn) injection into the economy.

  • Extra support for the welfare system: The UK government is granting another £6bn worth of support for the welfare system. This includes a £1,000 increase to the Universal Credit standard allowance for the next 12 months, as will the Working Tax Credit basic element.

The announcement followed immediately after UK prime minister Boris Johnson said he is “telling all cafes, bars, clubs, shops, and restaurants to close tonight, as soon as reasonably possible.

Read more: UK hospitality leaders fear coronavirus has already cost 500,000 jobs

Earlier this week, the Resolution Foundation said that UK government should introduce new rights for workers and pay their wages if firms struggle to do so during the pandemic.

Also this week, the government unveiled an “unprecedented” set of financial measures to help the UK economy tackle the impact from the coronavirus.

The package is worth 15% of UK GDP, up from a package announced last week which was worth 1% of GDP, and includes £330bn ($388bn) government-back loans and guarantees. 

Read more: UK chancellor under fire for promising firms £330bn but families £500m

But Resolution Foundation argues that the government’s plans to provide bridging loans are “unlikely to be sufficient” as firms cannot be sure a downturn will only last a few months. Firms are particularly likely to shed jobs, and consumers to slash consumption, if they have no idea how long disruption will last, which itself “risks a much deeper downturn.”

Johnson said in his daily coronavirus briefing on Thursday that businesses considering laying off staff to “stand by your workers” during the coronavirus pandemic.

“I say to business — stand by your employees, because we’re going to stand by you.”

Read more: Coronavirus: New rights for workers could prevent mass job losses

He added that previous governments had been accused of bailing out the banks during the 2008-09 financial crisis but “didn’t look after the people who really suffer.”

“This time it’s going to be different,” he said. “We’re going to make sure we look after the people who really suffer from the economic consequences of what we ask them to do.”