British government announces new emergency jobs scheme

Chancellor Rishi Sunak has outlined new measures to protect millions of jobs to support the economy in the wake of the Covid-19 crisis.

The Job Support Scheme which will replace the furlough scheme when it ends, will directly top up the wages of employees working fewer hours due to suppressed business demand, enabling workers to keep their jobs on shorter hours rather than being made redundant. It will run for six months from November.

Employees must work at least one-third of their normal hours and be paid for that work as normal, but the government will increase wages covering the remaining two-thirds of the pay. The scheme will target all small and medium-sized businesses across the U.K., though larger companies may be eligible if they have experienced a fall in turnover during the crisis. Employees will be guaranteed a minimum of 77 per cent of their regular earnings,  capped at £697.92 per month.

The new scheme will cost at least £300 million a month to run depending on take up — less than a third of the £1.1 billion cost of furlough during its peak. 

Nearly three million workers - or 12% of the UK's workforce - are currently on partial or full furlough leave, according to official figures.

The Chancellor also confirmed that he is extending the self-employment grant under “similar terms and conditions as the new Jobs Support Scheme.”

Also, businesses that have borrowed money through the government's loan scheme will also be given more time to repay the money. Rishi Sunak announced a “pay as you grow” scheme to allow firms to repay bounce back loans over a period of up to 10 years.

And a VAT cut for hospitality and tourism companies will also be extended until March 31 2021. The cut from 20% to 5% VAT - which came into force on 15 July - had been due to expire on 12 January next year.

“The financial markets have largely welcomed Chancellor Sunak’s speech, sparking a short surge in trading activity,” said Giles Coghlan, chief currency analyst at HYCM.