U.K. Firms Face Dwindling Cashflows as Government Support Tapers

(Bloomberg) -- More than half of businesses in the U.K. are seeing reduced cashflow since June as the government begins phasing out its job retention program.

The British Chambers of Commerce survey adds to the concerns that unemployment will spike in the coming months as the program in which the government pays the wages of idled workers comes to an end. About 40% of the 517 firms responding to the survey were not planning to access the bonus of 1,000 pounds ($1,300) offered to those who retain their employees' jobs until January 2021.

Although the government has paid out over 90 billion pounds in job-support and lending programs since the beginning of the pandemic, almost a third of British firms are still expected to decrease the size of their workforce in the next three months due to a severe cash crunch.

The government is “failing to provide support at the scale needed to protect jobs,” the BCC said as it published its results Wednesday.

The report comes a day ahead of the Bank of England's August meeting where it will set out new projections for growth and inflation. Officials have flagged unemployment as a primary concern.

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Starting this month, employers are expected to pay health insurance and pension contributions for their workers and take up the full salary burden from the end of October. The U.K. business lobby has called for an 18-month expansion of the employment allowance and increased threshold for health care payments to allow companies to keep workers.

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