Britain said on Friday it would take the unprecedented step of pumping money into companies in order to pay workers’ wages and cushion an expected surge in unemployment as much of the economy goes into a near shutdown due to the coronavirus outbreak.
“Today I can announce that for the first time in our history the government is going to step in and pay people’s wages,” finance minister Rishi Sunak said.
He said there would be no financial limit to the size of the plan.
Sunak also said businesses would be allowed to hold on to 30 billion pounds ($35 billion) of value-added tax, which they would normally pass on to tax authorities over the next three months, in order to help their cash flow.
“That is a direct injection of over 30 billion pounds of cash to businesses, equivalent to 1.5% of GDP,” he said at a news conference to announce measures to support the economy.
Moments earlier, Prime Minister Boris Johnson ordered the closure of pubs, restaurants, gyms, nightclubs and other businesses for Friday as he ramped up the country’s attempts to slow the spread of the virus.
Sunak, who announced a series of other measures earlier this week to help companies, said the government would give grants to cover 80% of workers’ salaries – up to a value of 2,500 pounds ($2,930) a month each – if businesses kept them on staff.
“The truth is we are already seeing job losses and there may be more to come,” Sunak said. “I cannot promise you that no one will face hardship in the weeks ahead.”
He said the grant system for helping meet the wages of workers would be up and running by the end of April.
Other measures included an extra 7 billion pounds for the welfare system.
Deutsche Bank said on Friday that Britain was facing a 4% contraction in its economy in 2020 and the unemployment rate could more than double to over 8%.
If the crisis proved deeper than thought, Britain’s economy could shrink by around 6%, making it the country’s worst recession for a century, the bank said.
On Thursday, the Bank of England cut interest rates to a new all-time low of 0.1% and announced a huge increase in its bond-buying programme.
Other countries around the world are also scrambling to come up with ways to temper the impact of the stringent measures to slow the spread of coronavirus.
In the United States, the Trump administration and Congress are negotiating a $1 trillion-plus package including sending checks of up to $1,200 to individuals, help for small firms and their staff and support for the health system.