Sunak Warned of U.K. Insolvencies Wave as Protection Ends
Critics say his wage-subsidy replacement announced last week will do little to prevent mass job losses in the coming months.
(Bloomberg) -- Britain faces a surge in insolvencies unless the government extends measures designed to shield firms struggling amid the coronavirus crisis, a business lobby warned Wednesday.
The Institute of Directors made its plea on the day that the suspension of wrongful trading rules is due to come to an end. It means directors of companies facing certain liquidation will be committing an offense if they continue to operate, including paying staff and suppliers.
“The suspension of these rules has given business leaders greater confidence to press on and seek a way through the uncertainty for their organization and staff,” said Roger Barker, director of policy at the IoD. “Now, the message to businesses against the wall appears to simply be to shut up shop.”
The warning highlights the pressure on Chancellor of the Exchequer Rishi Sunak as Britain enters a difficult winter.
Local lockdowns are being reimposed in response to a surge in coranavirus cases; trade talks with the European Union are deadlocked; and critics say his wage-subsidy replacement announced last week will do little to prevent mass job losses in the coming months, with the ax falling hardest on young people.
Two separate reports demonstrated the strains in the labor market.
The Recruitment and Employment Confederation found private-sector confidence subdued and many firms reducing pay. But there were some glimmers of hope, with short-term demand for permanent staff improving. The Institute for Fiscal Studies said 8% of older workers are planning to retire later than planned because the pandemic had hit the value of their pension funds.
Lloyds Bank meanwhile said business confidence improved in September but remained well below the long-term average. While an increasing number of firms were bringing back furloughed staff, almost 40% anticipate cutting employment.
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