UK finance minister announces emergency jobs package

Chancellor of the Exchequer Rishi Sunak leaves 10 Downing Street after attending a Cabinet meeting on 14 February, 2020.

Barcroft Media

U.K. Finance Minister Rishi Sunak is set to announce a new emergency package of measures to contain unemployment, replacing the country’s furlough scheme which is due to expire next month.

The scheme has subsidized 80% of wages for millions of workers furloughed as a result of the pandemic, but Sunak confirmed in July that it would be wound down as the country began to emerge from lockdown measures, instead offering businesses a bonus program for bringing furloughed employees back to work.

However, with many of those workers having been employed by the hospitality industry and the government now being forced to reintroduce some restrictions due to a spike in Covid-19 infections, economists have warned that the country could face a significant surge in unemployment in the fourth quarter.

Earlier this week, Prime Minister Boris Johnson announced a 10 p.m. curfew for hospitality venues in a bid to contain the spread of the virus. The U.K. reported 6,178 cases on Wednesday, up by 1,252 since Tuesday and taking its total confirmed cases past 412,000.

British media reports so far have suggested that Sunak could announce more wage subsidy initiatives and financial help, while some have suggested that the kind of salary top-up scheme currently operating in Germany and France could be on the table.

Just last week, the Bank of England gave its first indication that negative interest rates could be under consideration as it looks to play its part in shoring up the economy against the fallout from the pandemic, with GDP having plunged by a record 20.4% in the second quarter.

“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.

“However, this will likely be short lived, and I anticipate a general retreat to safe haven assets and cash savings as investors look to hedge against market uncertainty.”

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