Saving One Million U.K. Jobs Requires $250 Billion Stimulus Plan

(Bloomberg) -- The U.K. government must provide another enormous support package if it wants to save a million jobs, the Resolution Foundation said.

Chancellor of the Exchequer Rishi Sunak will unveil a new series of measures to combat the economic impact of the coronavirus pandemic on Wednesday. The Treasury has already announced additional funding for job centers, while the business groups are warning that unemployment will spike when the current stimulus runs out.

Britain is slowly reopening pubs and restaurants after the biggest economic contraction in centuries in the second quarter. With almost half of companies expecting to let go of employees when the government’s job retention program ends, the country is at risk of long-term scarring.

“The measures the Chancellor announces in his mini-Budget tomorrow need to be big enough to reflect the size of the crisis we face, targeted at the sectors that need the most support, and flexible enough to cope with the uncertainties that lie ahead,” said James Smith, research director at Resolution.

Resolution is forecasting a relatively optimistic 9.3% overall contraction this year, versus 14% from the Bank of England. But it sees a much weaker recovery in 2021 than either the BOE or the government’s fiscal watchdog.

Until a vaccine for the virus is found, a fifth of the U.K. economy will be hampered by social distancing measures, according to the report. This includes travel and tourism, hospitality, face-to-face retail, the arts and leisure.

Without another 200 billion pounds ($250 billion) of stimulus -- equivalent to 10% of GDP -- a million further jobs risk being lost. More than nine million workers have been furloughed since March and over 500,000 have already lost their jobs.

The report recommends giving every adult 500 pounds in vouchers to spend in the worst hit sectors, at a total cost of 30 billion pounds. It also said the furlough program, in which the government pays a substantial portion of workers’ wages, should be extended beyond the current cutoff of October.

To help even out regional disparities, the think tank recommends tripling capital investment to 14 billion pounds from the 5 billion pounds alloted in the current fiscal year.

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