LONDON (Reuters) – British finance minister Rishi Sunak will announce on Wednesday his next moves to prevent a wave of job cuts from snowballing into a full-blown unemployment crisis in the world’s sixth biggest economy.
FILE PHOTO: Chancellor of the Exchequer Rishi Sunak leaves Downing Street, following the outbreak of the coronavirus disease (COVID-19), London, Britain, May 4, 2020. REUTERS/John Sibley/File Photo
He is already on course to take state borrowing to World War Two levels as he subsidises 9 million jobs – equivalent to more than a third of private-sector workers – alongside other emergency measures.
Britain, with a toll of close to 45,000 coronavirus-linked deaths, has been hit harder by the epidemic than any other European country. For the worst affected sectors of an economy that shrank by 25% over March and April, recovery remains a long way off.
Sunak, a 40-year-old former Goldman Sachs analyst who became finance minister in February, has won plaudits for setting aside the pro-market instincts of his Conservative Party to put the state at the heart of Britain’s COVID-19 response.
Now, with a string of companies announcing redundancies – from the publisher of the Daily Mirror to aerospace engineer Rolls-Royce – he is facing calls to do more, including cuts to employers’ social security contributions.
Sunak’s announcement in parliament – expected around 1130 GMT – will include a 2 billion-pound ($2.5 billion) fund to create six-month work placement jobs for unemployed 16-24 year-olds and the largest ever rise in partly government-funded apprenticeships, the finance ministry said.
“Young people bear the brunt of most economic crises, but they are at particular risk this time because they work in the sectors disproportionately hit by the pandemic,” Sunak said.
The Resolution Foundation think tank estimated the programme could help up to 300,000 young people into work.
A recruitment industry body warned on Wednesday that a “jobs crisis” was already under way.
Sunak has said he will separately spend 3 billion pounds to improve the energy efficiency of homes and public buildings which would support more than 100,000 jobs.
British newspapers have said he is considering a cut to value-added tax or giving away vouchers to boost spending at pubs, restaurants and other hospitality firms which employ 2.4 million people but are struggling under social distancing rules.
Sunak is also expected to cut property purchase taxes which could jump-start the housing market and the broader economy.
Three weeks after the end of lockdown in most of the UK, the number of shoppers visiting retailers is still down by nearly 50% from a year ago.
Spending on hospitality and entertainment was also down by almost half compared with last year when pubs and restaurants reopened last weekend for the first time since March.
Britain’s economy looks set to shrink by more than 10% this year, the International Monetary Fund predicted in June, worse than the United States and Germany although a less severe contraction than in some other European countries.
Sunak also has to contend with a possible shock linked to Britain’s departure from the European Union, as London and Brussels continue to tangle over a deal to formalise their post-Brexit trade relationship from the start of next year.
In the face of so much uncertainty, Sunak has resisted calls to announce a full budget statement now, meaning he might reserve most of his fiscal firepower until the autumn.
Writing by William Schomberg; additional reporting by Andy Bruce; Editing by Shri Navaratnam and John Stonestreet