Chamber Reacts to Winter Economy Plan

Date: 24/09/2020
Author: Subrah Krishnan-Harihara
Company: Greater Manchester Chamber of Commerce

In an endeavour to bolster businesses, protect jobs and safeguard the nascent economic recovery, the Chancellor Rishi Sunak - for the fourth time this year - announced more support measures. The latest package included a new salary subsidy scheme, tax and loan repayment deferments and, an extension of the reduced VAT rate for the hospitality and leisure sectors to March 2021. Together, these measures may provide some confidence to businesses that help will be available to enable them to tide over a "winter of economic stagnation". Yet, questions remain about whether the latest package will offer respite to workers, protect jobs and deliver economic growth. There is also now a growing sense that the COVID-19 pandemic will cause higher unemployment and leave deep economic scars. In our view, the measures announced today may help businesses tide over a short-term financial crisis but they do not help assuage deeper nervousness about recovery, not shore up business confidence enough to stimulate further investment and expansion. 

For several months, GM Chamber and member businesses have been asking for employment support to continue beyond the Coronavirus Job Retention Scheme (CJRS) and the new Jobs Support Scheme (JSS) is a partial answer to that call, albeit a far less generous answer. The CJRS was a success and has helped protect the jobs of nearly nine million workers during the pandemic. Although several previously furloughed employees have since returned to work, it is estimated that up to three million are still in furlough. Today, the Chancellor confirmed that the Coronavirus Job Retention Scheme will indeed end on 31st October and be replaced by JSS under which the wages of those employed part time will be subsided by the state. In line with the viability criteria that the Chancellor was keen to emphasise and reemphasise, to be eligible for the JSS, an employee must be in work for at least a third of their normal hours with HM Treasury and the employer each paying a third of the wages for the remaining hours the employee is not in work. From the employers' point of view, this puts an additional cash burden to keep workers in the payroll because they now have to pay a much higher proportion of their employees wages than what was payable under CJRS. For businesses which are "viable" but face gloomy prospects in the near-term, the JSS may be an alternative to laying off people but for the vast majority of workers in the worst affected hospitality, arts and entertainment sectors, the JSS is unlikely to offer any relief. 

The facility to extend tax and loan repayments could indeed help businesses with cash flow and cash-strapped businesses have more time to apply for Bounce Back Loans. But debt must be repaid and for businesses who have already taken on debt and are facing serious uncertainty, the path to growth will be unclear and thorny. Furthermore the implication of the viability principle, unavoidable as it may be, is that some businesses will indeed fail and many jobs may be lost despite the billions pumped into business support since March.  

By the Chancellor's own admission, the British economy has changed direction and been forcefully restructured since the pandemic struck. For a considerable net rise in future employment, lots of new jobs will need to be created in growth sectors such as e-commerce and priority sectors such as low carbon and the green economy. Yet, a glaring omission in today's announcement was support for training and reskilling of the workforce. Additional support for training for both those who are employed part time by struggling employers and those workers who may find themselves out of employment in the coming months would have delivered a skills dividend and a workforce ready for innovation and new jobs.  

Finally, today's announcement must not be treated by Government as the culmination of economic and business support. The short-term future is uncertain, and Brexit is approaching fast. To avoid a double whammy for businesses, the Chancellor must remain open to taking additional action to support parts of the economy that will be hit particularly hard if the rise in coronavirus infections requires maintaining additional restrictions during the key festive trading season.