Sunak to Look at All Options to Bring U.K. Furlough Support to End

(Bloomberg) -- Chancellor of the Exchequer Rishi Sunak is examining ways to move millions of workers off government support and back into their jobs as the U.K. leaves its lockdown.

In March, as the U.K. went into lockdown to slow the spread of coronavirus, Sunak announced a furlough program where workers received 80% of their wage to stay home.

Read more: How Sunak's $131 Billion Virus Aid Package Is Being Rolled Out

It's now supporting more than 6.3 million people at a cost of billions of pounds, and the chancellor has to find a way to ease them off it. Amid the debate about how to wind down aid, the British Chambers of Commerce said Wednesday that most U.K. businesses could be up and running days after restrictions are lifted, with smaller firms primed to return the quickest.

A government official said Sunak was working through policy options this week, with no decisions taken and everything still on the table.

Options reported in newspapers include reducing the subsidy to 60%, to encourage people to go back to work, and allowing people to work while receiving a smaller subsidy, possibly as a way of helping businesses restart slowly.

Getting the exit from the plan right is crucial if the U.K. is to avoid worsening an already perilous employment situation. The Resolution Foundation warned Wednesday that the crisis could see youth unemployment spike by 600,000 this year, taking it above 1 million.

Expensive Support

The government support for jobs is expected to cost 39 billion pounds ($48 billion). If it runs too long, it will cost more. But if Sunak ends it too abruptly, businesses short of money may have to lay off staff, negating the point of the program.

More than 800,000 employers are using the program, and he has promised there will be no cliff edge end to the support. BCC Director General Adam Marshall echoed that sentiment in an interview with Bloomberg TV on Wednesday.

“Firms are going to have to have access to it for some time to come because not every business can open at the same pace,” he said. “We caution against just breaking it down by sector because if you withdrew support from some firms that are in the supply chains of these businesses but kept support to others, you could see some supply chains collapse.”

According to the BCC survey, almost two-thirds of companies with fewer than 10 employees and half of large businesses said they could be ready within a week.

The poll, conducted April 29-May 1 found, suggests commerce could ramp up fairly quickly following the lifting of the lockdown, although questions remain about how businesses will be impacted by continued social distancing rules.

The timing of any easing is still uncertain. A decision on whether to extend the lockdown is due this week, with every indication that Prime Minister Boris Johnson will say the closures of schools and most shops needs to continue. But he is likely to set out a pathway back to normality, once scientists are sure that coronavirus can be kept under control.

On Tuesday:

Britain officially became the worst-hit country in Europe, overtaking Italy with 29,427 confirmed coronavirus deaths
Other data from U.K. authorities showed Covid-19 is now suspected of playing a role in the death of 32,290 people. That is higher than the official death toll, which is based on confirmed cases
Papers released by the government's scientific advisers showed modeling on March 26 put an “optimistic” scenario at 10,000 deaths
Another paper from the so-called SAGE committee suggested any easing of the lockdown should be gradual, because reimposing restrictions if virus rise again would damage public trust
The scientist whose modeling persuaded Johnson to introduce the lockdown said he would “step back” from his advisory post after he broke social distancing rules to meet a woman
Chief Scientific Adviser Patrick Vallance said a second wave of coronavirus could hit in the winter, piling pressure on the National Health Service at a time when seasonal flu is also likely to be a challenge
China warned the U.K. that British political critics risk poisoning relations between the two countries with their attacks on its handling of the virus outbreak in Wuhan