Pound rises from depression on new jobs protection plan

Lianna Brinded
·Head of Yahoo Finance UK
·3 mins read
Chancellor of the Exchequer Rishi Sunak walks across Downing Street to a cabinet meeting in London, Tuesday, Sept. 15, 2020.(AP Photo/Frank Augstein)
Chancellor of the Exchequer Rishi Sunak. Photo: Frank Augstein/AP

Investors started reacting positively to the UK chancellor’s new jobs protection plan, called the “Winter Economy Plan.”

After the pound initially sank against the US dollar (GBPUSD=X) in early trading, in anticipation of the details of the plan, the cable trade rose by over 0.2% to over $1.27.

Chart: Yahoo Finance
Chart: Yahoo Finance

On Wednesday afternoon, chancellor Rishi Sunak tweeted that he would update parliament with the cabinet’s plans to protect jobs in the last few months of the year.

He said: “As our response to coronavirus adapts, tomorrow afternoon I will update the House of Commons on our plans to continue protecting jobs through the winter.”

At 11.45am local time, Sunak revealed that while the government would not extend the furlough scheme, it would:

  • Top up wages of workers, covering up to two thirds of hours

  • Extend the Self-Employment Income Support Scheme

  • Businesses who deferred their VAT will no longer have to pay a lump sum at the end of March next year

  • Extend the 15% VAT cut for the tourism and hospitality sectors to the end of March next year

  • Extend Coronavirus Business Interruption Loans for up to 10 years.

The government launched its furlough scheme earlier this year which was intended to help keep employers from sacking staff by subsidising up to 80% of their wages. It was optional for the employer on whether they wanted to top up the remaining 20% of wages.

However, the scheme comes to an end in October and many employers have warned that it needs to be extended to save jobs. On 15 September, Sunak declared the furlough scheme has “done what it was designed to” and resisted mounting pressure to extend support for hard-hit sectors.

Office for National Statistics (ONS) data shows that employers have axed 695,000 staff since March, and Britain’s unemployment rate ticked higher to 4.1% between May and July.

READ MORE: UK government unveils 'Winter Economy Plan' to protect jobs and firms

The claimant count, which includes unemployed and low-paid workers receiving work-related benefits, stood at 2.7 million last month, up 120.8% since March.

Around five million workers were still receiving some or all of their income through the scheme. Many of those who were or are still on the furlough scheme have been employed in the hospitality sector.

Among the range of new measures announced by the government this week:

  • Working from home: After telling people to get back to the office, the government now says that if you can work from home, you should avoid going into the workplace. It said that for jobs where it’s not possible, like construction and retail, then people should go into work but employers should adhere to health and safety protocols to make it as safe as possible.

  • New closing time and rules for pubs, bars and restaurants: There is now a strict closure time of 10pm local time. These establishments will also be restricted to table service only and bar staff and non-seated customers, shop workers and waiters will be obligated to wear face masks.

These two measures are set to impact the hospitality sector further.