U.K. End to Pandemic Aid Pushes Employers to Adapt or Fade Away

(Bloomberg) -- The U.K. is entering a critical phase in the coronavirus crisis that could shape the future of its economy long after the pandemic is gone.

Employers are anxiously awaiting to see whether mounting pressure on Chancellor of the Exchequer Rishi Sunak will force him to reverse course on plans to phase out wage-support programs. That would echo a proposal this week by Germany, where the finance minister wants to extend support to 24 months.

It could save millions of jobs in the short term, but the British government has so far insisted the economy must be allowed to restructure for a post-virus world.

There are political risks. Prime Minister Boris Johnson won over traditionally left-wing voters in northern England by promising an economic boost. Now those areas face the biggest jobs crunch -- and renewed restrictions as infections rise.

Here’s a look at how three employers in that region view the end of aid.

The Event Manager

Few businesses were hit as hard by the coronavirus lockdowns as those in travel, tourism and hospitality. Even now, consumers are reluctant to make plans that could be wrecked at short notice by renewed restrictions such as quarantines.

Chrissie McLaren’s CM Event Recruitment Ltd. near Leeds provides waiting and cleaning staff for events such as car and horse races, and was hit by mass cancellations. She has so far been able to pay the salaries of 53 employees using the government’s furlough program.

The business remains paralyzed though. She reckons customers will return, but that could be long after she has to start contributing to wages.

“I thought to myself, what if I sell my car?” McLaren said.

The trap for companies like McLaren’s is that the severe loss of revenue also makes it hard to make staff redundant.

“How can a company that hasn’t traded since March pay redundancy?” she said. “The only way to get help is to make the company insolvent, which would cost 5,000 pounds. How can you do that when there is no money -- and why would you close a perfectly viable business?”

The Manufacturer

A short drive northwest, in Bradford, Nick Garthwaite describes the furlough program as a “godsend” for the manufacturer where he’s managing director.

Christeyns U.K. Ltd. makes commercial laundry chemicals for hotels, hospitals and construction companies, and lost a third of its revenue this year. It placed 80 of the 140 staff on furloughs and topped up the government aid to 100% of wages.

“When Boris told everyone not to stay at the hotels, it had a big impact on our business,” he said. “Even in the health-care sector, as all the non-essential procedures were canceled, the normal volume of linen used was lower than usual.”

Now most of his staff are now back to working five days a week, but some are still furloughed and 26 employees have been cut permanently

“We did a restructuring, which is always painful. We had to let go of people with long years of service,” Garthwaite said. “At some point furlough has to stop and businesses need to stand on their own.”

The Retailer

Further west, in Hebden Bridge, James Wilthew put all three of his employees on furlough. That carried his business, The Afghan Rug Shop, through the lockdown.

Now that high streets have reopened, all his workers are back, and his store is operating three days a week. Still, he’s also cautious of this being a false dawn.

“At the moment we are doing well enough to keep our staff,” he said. “We must wait for the next months to see if it stays this way or it’s just people buying things because they are allowed to for the first time in months.”

©2020 Bloomberg L.P.