LONDON – The British government has broadened two of the biggest economic relief programs it has put in place to limit the economic fallout of the coronavirus pandemic.
On Friday, Treasury chief Rishi Sunak said that the government's Coronavirus Job Retention Scheme has been extended by another month until the end of June. The decision was widely anticipated after the government confirmed Thursday that it was extending the coronavirus lockdown by at least another three weeks.
The scheme, which allows firms to furlough employees with the government paying cash grants of 80% of their wages up to a maximum of 2,500 pound ($3,200) a month, was originally open for three months and backdated from March 1 to the end of May.
Businesses ranging from Premier League clubs to bakery chains and airlines are taking part in the scheme, whose cost is expected to run into the tens of billions of pounds.
“It is vital for people’s livelihoods that the U.K. economy gets up and running again when it is safe to do so, and I will continue to review the scheme so it is supporting our recovery,” Sunak said.
Even with the scheme in place, the country’s unemployment rate is set to spike from its near 45-year low of 3.9%. The Office for Budget Responsibility, an independent body that provides economic forecasts to the government, warned this week that the British economy could shrink by 35% in the second quarter from the previous quarter if the lockdown stays in place for three months until late-June. In that scenario, it said unemployment will more than double, rising by more than 2 million to 10% in the second quarter.
In another attempt to contain the economic damage, the British government also raised the cap on one of its coronavirus loan guarantee scheme so that all companies with annual revenue of more than 45 million pounds can access support if they were hurt by the lockdown.
Many businesses are struggling to remain solvent and many mid- to large-sized companies are fretting about not being eligible for the Coronavirus Large Business Interruption Loan Scheme, which launches Monday.
Sunak, said he wanted to ensure that “ no business slips through our safety net of support as we help protect jobs and the economy.”
Under the scheme, which provides 330 billion pounds of support in total, the government has pledged to give banks an 80% guarantee on the loans.
Companies with sales of between 45 million pounds and 250 million pounds can apply for 25 million pounds of financing while those with revenue of more than 250 million pounds can draw on 50 million pounds.
Adam Marshall, director general of the British Chambers of Commerce, said he is pleased to see Sunak respond to “real-world business concerns” and expanding assistance to “good companies facing severe cash constraints as a result of the coronavirus crisis.”
There are separate schemes for smaller firms and Britain's largest companies, including financial support for those that opt to keep workers on payroll rather than firing them.