British finance minister Rishi Sunak will announce on Wednesday his next moves to prevent a wave of job cuts from snowballing into a full-blown unemployment crisis in the world’s sixth-biggest economy.
Sunak is already on course to take the United Kingdom’s borrowing to World War II levels as he subsidises nine million jobs – equivalent to more than one-third of private-sector employees – alongside other emergency measures.
The 40-year-old former Goldman Sachs analyst, who only became finance minister in February, has won plaudits for setting aside the pro-market instincts of his Conservative Party and putting the state at the heart of the UK’s coronavirus response.
Now, with a string of companies announcing redundancies – from the publisher of the Daily Mirror newspaper to jet engine maker Rolls-Royce – he is facing calls to do more, including cuts to employers’ social security contributions.
Sunak’s announcement in parliament – expected around 11:30 GMT – will include a 2 billion-pound ($2.5bn) fund to create six-month work placement jobs for unemployed 16 to 24-year-olds and the largest ever rise in partly government-funded apprenticeships.
“Young people bear the brunt of most economic crises, but they are at particular risk this time because they work in the sectors disproportionately hit by the pandemic,” Sunak said in a statement.
The Resolution Foundation think tank estimated the programme could help up to 300,000 young people find work.
Sunak has said he will separately spend 3 billion pounds ($3.8bn) to improve the energy efficiency of homes and public buildings, which would support more than 100,000 jobs.
He is reportedly considering either making a cut to value-added tax or giving away vouchers to boost spending at pubs, restaurants and other hospitality firms, which employ 2.4 million people but are struggling to cope with social distancing rules.
Sunak is also expected to cut property purchase taxes which could jump-start the housing market.
Economy on the ropes
The collapse in the UK’s labour market eased only slightly last month, according to a survey published on Wednesday by the Recruitment and Employment Confederation (REC) industry body, which warns that a “jobs crisis” is under way.
REC said demand for staff continued to fall and at 31.9 in June – up from 19.1 a month before – it remained well below the 50 level that represents an increase in hiring.
“This is now a jobs crisis,” Neil Carberry, chief executive of the REC, said. “Rishi Sunak should use today’s summer statement to boost job creation, with a cut in National Insurance designed to retain jobs and boost hiring.”
The supply of available workers soared in June by the largest amount in more than a decade, according to the survey, which is based on responses from around 400 recruitment companies.
The UK’s economy shrank by 25 percent over March and April and there has been a limited recovery for the hardest-hit sectors.
Three weeks after the end of lockdown in most of the UK, the number of shoppers visiting retailers is still down by nearly 50 percent from a year ago.
Spending on hospitality and entertainment was also down by almost half compared with last year when pubs and restaurants reopened this weekend for the first time since March.
The UK’s economy looks set to shrink by more than 10 percent this year, the International Monetary Fund predicted in June – worse than the United States and Germany, although a less severe contraction than in some other European countries.
But Sunak also has to contend with a possible Brexit shock at the end of this year as London and Brussels continue to tangle over a trade deal.
In the face of so much uncertainty, Sunak has resisted calls to announce a full budget statement for now, meaning he might reserve most of his fiscal firepower until the autumn.