UK Chancellor Preparing Wage Subsidy Bill To Protect British Workers Hurt By Coronavirus Pandemic

Britain’s Chancellor of the Exchequer is preparing an employment and wage subsidy package in an effort to save millions of jobs in the U.K.

Rishi Sunak has engaged in discussions with business groups and union leaders -- including the Federation of Small Businesses and the Trades Union Congress -- to hammer out a deal to pay salaries to workers during the coronavirus pandemic which has temporarily closed or shuttered many companies across the country.

Such a plan may cost billions of pounds.

The wage package comes on the heels of other government fiscal measures, including an emergency rate cut by the Bank of England and a comprehensive $400 billion program that will include business loans, grants and tax holidays.

Other countries have instituted their own wage plans to protect jobs. For example, in Denmark, the government has vowed to pay 75% of salaries at private firms for three months, as long as they don’t fire any workers.

"Many other countries have now done this - France, Germany, Spain, Italy have put employee wage support in place and if that comes through quickly I believe there are businesses who will take a different decision because they want to keep their people and they want their businesses to be viable for when we recover," said Dame Carolyn Fairbairn, director general of the Confederation of British Industry.

Unions demand the government page wages of workers.

"As well as providing emergency support to business, it is essential that money goes into workers' pockets now. We must do whatever it takes to stop businesses going to the wall and workers being plunged into poverty," said Frances O'Grady, general secretary of the Trades Union Congress.

Critics contend that the loan program Sunak introduced earlier in the week will not be sufficient to save British companies.

Small and medium sized businesses in U.K. are facing a "catastrophic" loss of revenue, warned former business secretary Greg Clark and the all-party Parliamentary group on Small Business Banking.

"Businesses are in crisis and this crisis threatens to be worse than the global financial crisis, possibly the worst recession in history,” said Kevin Hollinrake, chair of the All-Party group. "Loans won't work; the loan just kicks the can down the road and makes the firms bear the huge cost of stopping the virus; the loans have to be paid back later. Who would want to invest in a business? What happens if another virus strikes? Business people know about business cycles and they expect to see recessions where their revenue might drop by 10% or even 20%. But here it's 90% or 100%."

In the House of Commons, Clark warned: "With revenue collapsing and no knowledge of when normal trading can resume [companies] see no choice but to lay off workers now. The loan scheme that the chancellor announced on Tuesday is not enough to prevent that. These businesses have no idea when they will be able to pay back the debt they will incur. It provides no reason to keep staff employed: in fact - the reverse - because the smaller the wage bill, the less would have to be borrowed."

Clark added: "On Tuesday the chancellor promised employment support but as each day goes by, businesses are making decisions that will be irreversible. If the government does not act immediately, large numbers of people will be unemployed, registering them will put huge pressure on the welfare system, vital skills will be lost and good businesses will cease trading -- who themselves will be the customers and suppliers of other businesses.”

On the ground, British businesses are also urging the chancellor to subsidize wages. Some companies do not even know if they qualify for loans spelled out in the prior stimulus package.

"There's been confusion about whether we're going to be eligible for the grants available to small businesses," said Alice Todd, co-founder of swimming holiday firm Swim Quest. "We can survive just about for the next two to three months. After that, it's going to be extremely worrying and we're going to struggle to pay our overheads.”

Jonathan Neame, chief executive of Shepherd Neame, which owns about 330 pubs and hotels in the southeast of England, said: "We contacted our local authorities on behalf of our tenants [pub landlords], and they don't know. They've had no instructions and told us to call them back next week. There isn't the time, businesses are closing now," he added.

The Institute for Fiscal Studies warned that the fiscal measures may not save jobs in the retail, leisure and hospitality industries.

"It will remain as expensive to pay people and if demand is down then jobs are likely to go,” said IFS director Paul Johnson. "Supporting employment might require a targeted package which included targeted cuts to employer national insurance contributions, a delay in increases to the National Living Wage, and increased support for individuals through Universal Credit."

Neame warned that businesses will soon have to lay off workers if funds are not immediately forthcoming.

"We desperately want to hang onto our people," he said. "But if you get a demand shock like we've had in the last couple of days, then the only place that most businesses can look is to lay off staff."

Neame also urged the government to suspend taxes.

"All tax that is due should be cancelled. Most businesses will have built up reserves to pay for the quarterly [value-added tax] bill and the business rates bill, therefore the cash is in the business, and if that liability is cancelled, that is cash that they can live off for the next period," he said.