More than 11 million Britons have been furloughed or left unemployed by the economic shutdown due to coronavirus.
Shocking new figures reveal that nearly a third of British workers have been affected by the downturn that has seen many businesses shuttered and employees unable to work.
The lockdown is pushing many firms to the brink of collapse, with one report warning today that up to 11.7million people could be furloughed or left jobless in the three months to the end of June.
Chancellor Rishi Sunak is facing mounting pressure to boost his business bailout so that the Government increases its guarantee on loans to struggling firms to 100 per cent.
The Treasury will today announce a further £1.25billion package to support innovative firms hit as the coronavirus lockdown causes the economy to stutter to a halt.
It will include a £500million loans fund for high-growth companies and £750million in loans and grants for small firms focused on research and development.
Chancellor Rishi Sunak (pictured in March) will today announce a further £1.25billion package to support innovative firms hit by the coronavirus lockdown
But thousands of companies are already struggling to claim state aid under the Government’s existing £330billion of coronavirus schemes.
Smaller businesses especially have encountered huge obstacles when trying to obtain vital Government-backed loans under the Coronavirus Business Interruption Loans Scheme (CBILS).
These loans, handed out by high street banks, can give businesses up to £5million to keep them afloat. And to incentivise the lenders, the Government will take on 80 per cent of any losses they suffer.
But because banks will still have to bear 20 per cent of the risk, they have been asking for detailed financial information and forecasts which firms are simply unable to provide fast enough.
And for any businesses which were already struggling before the lockdown began, Government-backed loans are near impossible to come by.
Former Labour leader Ed Miliband (pictured in 2015) said the Chancellor needed to move to a 100 per cent guarantee of loans for smaller businesses
MPs and City grandees have called on the Government to increase its guarantee on the loans to 100 per cent, as in Switzerland and Germany, to speed up the process.
Former Labour leader Ed Miliband said: ‘The Chancellor must move to a 100 per cent guarantee of loans for smaller businesses. In the coming days, businesses are facing critical decisions about their future.’
Meanwhile, a paper by think-tank the Resolution Foundation predicts that unemployment could hit 3.4million in the three months to the end of June with a further 8.3million workers furloughed.
Employees in the lowest-paying hospitality and retail sectors are most likely to be hit. The foundation said: ‘As many as 3.1million employees (46 per cent) in these sectors could be furloughed, with an additional 800,000 workers in this part of the economy becoming unemployed.’
From today employers can start applying to the Treasury for financial help under its Job Retention Scheme, which will see the Government paying up to 80 per cent of furloughed workers’ salaries up to £2,500 per month.
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Rescue cash is a feeble trickle
by Ruth Sunderland for The Daily Mail
Politicians, particularly Conservatives, often refer to the UK’s near six million small firms as the backbone of the economy. No doubt, they are sincere.
But however well-meaning, efforts so far to help these businesses in the pandemic have fallen woefully short.
Just compare the tidal wave of money that has flowed to US firms with the feeble trickle that we are seeing here.
In the States, banks have made 1.6million loans worth around $340billion (£270billion) to companies through special Covid-19 schemes.
As of last week, UK banks had made a paltry 6,000 loans worth just £1.1billion. The figures speak for themselves.
In the States, banks have made 1.6million loans worth around $340billion (£270billion) to companies through special Covid-19 schemes (file image)
Indeed, in the US, so much money has been handed out in such a short space of time that the funds have temporarily run out, though congressional leaders are expected to agree a deal to provide more – and soon. As a consequence, millions of American businesses and jobs are being saved.
So why are we doing so abysmally in comparison?
One reason is that the Small Business Administration, which is running the scheme in the US, is highly efficient. The same, sadly, cannot be said for the British Business Bank, which performs the equivalent function here.
The most important difference between the UK and the US is an intangible one: attitude.
The American government and the banks there have approached the Covid-19 loans crisis with a positive, can-do spirit, while our own banks have been their usual dead-hand, nay-saying selves. The US approach has been to do whatever it takes to save their firms, so their scheme is being fully underwritten by the American taxpayer.
The mentality here is one of avoiding losses. Therefore, loans are only 80pc guaranteed by the British government (ie the taxpayer) and the banks are forced to do stringent credit checks.
Andrew Bailey, the new governor of the Bank of England, has said we should shift to 100 per cent underwriting here. He is right.
Yet not even an existential threat to our entire economy is enough to shake the big banks out of their habitual negative torpor.
Oddly enough, it is RBS, the biggest villain in the credit crisis, that’s doing best so far. Under its new boss Alison Rose, it singlehandedly accounts for around half of the total Covid-19 loans, which suggests Barclays, Lloyds and HSBC are dragging their feet.
Thousands of entrepreneurs remain embittered and distrustful of the high street lenders after being betrayed during the credit crunch. They have turned to the banks in the pandemic with sinking hearts and trepidation. If politicians and bankers do not act quickly their worst fears will be confirmed.
We must find a way to offer our struggling firms a lifeline in time, otherwise the backbone of the economy will buckle and break.