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Coronavirus Job Retention Scheme in UK – Estimated total cost at as much as 56 billion pounds

Britain’s bailout battle is heating up before the first penny has even been paid in an unprecedented effort to save jobs amid the coronavirus pandemic.
While more than half of U.K. companies are expected to apply for government grants to pay furloughed employees, critics say they expect too much of the cash to go where it’s not needed.

“In my opinion, all allowances, handouts and incentives don’t go to the most needy but to the people or organizations most adept at claiming them,” Hargreaves Lansdown Plc co-founder Peter Hargreaves said in an email. “Letting people have the choice to work would be a better solution.”

Under the Coronavirus Job Retention Scheme, which starts taking applications on Monday, employers can claim a grant covering 80% of the wages for a furloughed employee of up to 2,500 pounds a month ($3,100). The expected participation rate — and Friday’s announcement that it would be extended into June — puts the estimated total cost at as much as 56 billion pounds. (The two bailouts of Royal Bank of Scotland Group Plc in 2008 and 2009 cost 46 billion pounds up front.)

A public outcry prompted a change of heart at two soccer clubs, Liverpool and Tottenham Hotspur. Both teams reversed initial decisions to furlough some lower-paid employees.
Some media groups, like Reach Plc, the owner of the Mirror titles, decided to furlough, while others — such as Daily Mail & General Trust Plc — have resisted.

In a letter to employees, Jonathan Rothermere, DMGT’s chairman, says: “Many news organizations are being forced to furlough staff and introduce redundancies. We have striven hard to come up with a plan which allows us to avoid these actions.”

The group has instead asked its staff earning 40,000 pounds or more a year to accept a graduated pay-cut for the duration of the crisis, for which they will be allocated shares in the parent company.

Accounting firm BDO decided to use the program — alongside pay cuts for partners — to help cover the wages of 700 of its 5,500 staff during a period of lower revenues.

Larger rival PwC has taken a different approach.

“Our understanding is that the furloughing arrangements were not designed for firms in our situation,” said Kevin Ellis, chairman of PwC in the U.K. “Furloughing is appropriate for those organizations that would have otherwise made redundancies as a result of Covid-19. We feel that the right thing to do is for our partners to bear any financial impact of the crisis first so that we can protect our 22,000 staff and their dependents and continue to pay our 2,000 suppliers on time.”

Underscoring the debate is the biggest known unknown: What the economy will actually look like once the pandemic has passed.

“One problem is trying to understand how long this will go on for and how deep the impact will be,” said David Ketchin, head of Europe for Hackett Group, a management consultancy. “The scheme absolutely is something that’s prevented large swathes of layoffs in the first instance, but if this does go on for a long time it won’t make a big difference.”

Chosen excerpts by Job Market Monitor. Read the whole story @ What Does Furlough Mean for Britain? Coronavirus News, Jobs – Bloomberg


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