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Sunak Urged to Save U.K. Firms From ‘Ruin’ of Covid Curbs

Emily Ashton and Kitty Donaldson
·5-min read
Sunak Urged to Save U.K. Firms From ‘Ruin’ of Covid Curbs
Sunak Urged to Save U.K. Firms From ‘Ruin’ of Covid Curbs

(Bloomberg) -- Struggling businesses were just getting back on their feet after the U.K.’s first national lockdown sparked the country’s deepest recession in over a century. Now they face another six months of hardship after Prime Minister Boris Johnson unveiled a fresh tranche of coronavirus restrictions that will last until spring 2021.

Johnson’s announcement immediately put pressure onto Chancellor Rishi Sunak to set out how the government intends to protect jobs and help businesses through the autumn and winter, just as it winds up its support programs.

The Treasury has been considering a plan from business leaders for the state to top up wages of employees who return, but has so far rebuffed calls to extend the furlough program in full. “I don’t think the chancellor is minded to wholesale extend the furlough scheme,” First Secretary of State Dominic Raab told Sky News on Wednesday. “We are looking at targeted measures.”

The biggest blow is likely to be felt by the hospitality industry, which is being forced to close early -- at 10 p.m. each night from Thursday -- and will suffer from the government’s new instruction to office workers to work from home. That will leave many city centers virtually empty of customers during the working day and after hours.

“Lots of businesses will not survive this and we are going to see more and more people lose their jobs unless we have the support to counterbalance these restrictions,” Kate Nicholls, chief executive of trade body UKHospitality, said. “The Government must immediately announce an exhaustive package of financial support, otherwise our sector is facing ruin.”

Sunak and Johnson are trying to protect the country from a deadly resurgence of the coronavirus that left the U.K. with the highest death toll in Europe, while avoiding an economically disastrous second national lockdown.

In a statement to the House of Commons on Tuesday, the prime minister ordered restaurants and bars to close earlier to stop people passing on the disease after drinking alcohol. He also scrapped plans to allow live audiences back into sporting events next month.

‘Not Sustainable’

Tougher enforcement will follow, with higher fines for people failing to wear face coverings and breaking the law on gatherings.

City centers became ghost towns during the first lockdown in the U.K., and the government spent the summer months trying to encourage workers to return to offices and diners to eat out in restaurants.

Sunak is facing growing calls to announce a new package of support for hard-hit sectors when he delivers his autumn Budget later this year.

The Treasury has spent more than 50 billion pounds ($64 billion) on wage subsidies for workers and has backed more than 57 billion pounds of loans to businesses, but this is due to end in the next few weeks. Sunak has previously warned that the current level of support is “not sustainable.”

Bank of England Governor Andrew Bailey said Tuesday 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.

But the chancellor’s own Conservative colleagues are already pushing him to take action. “This will present a testing time, particularly for retail and hospitality over the run-up to Christmas,” MP Cheryl Gillan said in an interview. “The chancellor must again rise to the challenge and continue to bolster some of the sectors to ensure we minimize the damage to the economy.”

London Mayor Sadiq Khan has called for the government to come forward “within days” with financial support for the retail, hospitality and cultural sectors -- alongside ”an immediate targeted extension of the furlough scheme.”

Khan also believes the government’s restrictions don’t go far enough for London and more need to be examined “to protect both lives and livelihoods across the capital.”

But business groups warned that many jobs would be lost and companies would go to the wall without government help.

‘Seriously Fearing’

Mike Cherry, national chairman of the Federation of Small Businesses, added: “It’s paramount that the government urgently steps forward with an ambitious second round of support measures to help firms survive. Many businesses -- particularly those at the heart of our night-time economy and events industries -- are now seriously fearing for their futures.”

The Resolution Foundation think tank said phasing in restrictions to control the virus while simultaneously phasing out support for firms and workers was not sustainable.

“The Government should start by providing more financial help to the seven in eight workers who aren’t entitled to the 500-pound self-isolation payments,” its chief executive, Torsten Bell, said. “And with new restrictions being particularly bad news for the hospitality and leisure sectors, support should be focused there too.”

Danny Barnes, 52, a London cab driver for 29 years, said the new restrictions would “crucify” his industry. “I fell through the floor when I heard,” he said in an interview. “My takings have gone by 75% since March, and as a taxi driver I was relying on people going back to work. Why six months? Where does six months come from? This government, they keep changing their minds.”

(Update with Raab comments on wage support options in third paragraph)

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