Opinion: Ian McConnell: Please Mr Sunak, listen to the Germans before it is too late

Meanwhile, Pizza Express has announced 1,100 job losses and a raft of restaurant closures. And there have been heightened fears in recent days over the potential for thousands of job losses at struggling department store group Debenhams.

These latest developments come on top of announcements by the likes of British Airways, easyJet and Rolls-Royce, to name but a few, of thousands of job losses.

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Many of the huge job losses we are seeing are, of course, in sectors which have found themselves on the frontline in terms of the immediate economic fallout from the human tragedy that is the coronavirus pandemic.

Retailers had to close their physical outlets and restaurants had to shut up shop for months amid the lockdown put in place in the UK in March to slow the spread of Covid-19 and save many lives.

As lockdown has eased, customers have returned to some extent to shop and dine out but activity remains muted for retailers, still sharply down on a year earlier, and many restaurants and other hospitality businesses are operating at much-reduced capacity.

Figures published this week by the Scottish Retail Consortium show the total value of sales north of the Border in July was down by 8.3 per cent on the same month of last year.

While this marks a slowing of the year-on-year rate of decline from 40.3% in April, 27.6% in May, and 18.6% in June, the cumulative and ongoing pressures retailers are under are clear.

The good news, such as it is, is that the year-on-year rate of decline is slowing. But it remains very sharp.

Amid the slew of job-loss announcements, we seem ever further away from those days in early spring when the prospect of a V-shaped pattern looked possible for the lockdown-induced plunge in economic activity and subsequent recovery.

A sharp rebound looked possible particularly because of the coronavirus job retention scheme put in place by Chancellor Rishi Sunak, through which the UK taxpayer funded 80% of the wages and salaries of furloughed workers up to £2,500 a month until the end of July.

Mr Sunak, sadly, is determined to end this scheme by October, ignoring a raft of pleas to the contrary. And employers are being asked to contribute increased amounts, month by month, between August and the Chancellor’s end date for the scheme.

Not surprisingly, this requirement for employers to contribute, at a time when many remain closed and others are operating at much-diminished capacity, has coincided with a raft of job losses.

Of course, some companies will have been impatient to get on with job-cutting anyway regardless of the end date for the furlough scheme, with executive bonuses sometimes depending on such behaviour. And, sadly, the collective attitude to helping each other through the economic fallout from this crisis appears to have evaporated fast as the misery has ground on.

That is not to say that there are not still many people, including business owners and bosses, keen to help others out, crucially among them frontline workers as well as community-spirited folk and good neighbours. It is just that such an attitude seems far less widespread than at the height of the crisis.

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When the furlough scheme was unveiled by Mr Sunak, days before the UK’s move to full lockdown on March 23, it seemed a sensible, pragmatic move. It not only did the right thing morally in terms of protecting the income of people unable to work as measures were put in place to save many thousands of lives but was also exactly what was needed to minimise the ultimate damage to the economy and society.

There was a view among some commentators at the time that the scheme, which is costing tens of billions of pounds but has protected many millions of jobs, could be extended quite far into the future, depending on how the coronavirus pandemic and work on vaccines developed.

The fact of the matter, looking at the situation months later, is that the protracted nature of this pandemic is becoming ever clearer by the day.

So, if the furlough scheme was the right thing to do at the outset, it remains the key measure with which to persevere to try to mitigate the grim impact on the labour market of the economic fallout from the pandemic.

In fact, as the scale of the challenges becomes ever clearer, the furlough scheme is more important than ever.

Sadly, however, Mr Sunak is not for turning. You even get the impression, rightly or wrongly, that the Conservatives are sometimes talking as if they are using their money, rather than that of the UK taxpayer, to provide the furlough scheme support. They have talked about how generous they believe it has been, as if it is almost a charitable endeavour.

And, worryingly, we had the following comment from Mr Sunak last week: “I’ve been prepared to put aside ideology and dogma at the beginning of this crisis and do what I believed was right to protect people’s jobs, their incomes and businesses through what is an unprecedented and difficult time.”

READ MORE: Ian McConnell: Anyone seeing ‘addiction’ to furlough needs to take a look at reality of coronavirus crisis

This should not in any way whatsoever be a matter of ideology, or dogma. The furlough scheme is a matter of simple practicality, and good sense.

This is going to be a long haul. We have already seen local lockdowns put in place, just weeks after the easing of measures, in several places in England, including Leicester, and this month in Aberdeen.

Such lockdowns highlight the need for continuing support, and underline, along with the huge job-loss numbers, the impression that it will be a grim winter for the UK economy and millions of people.

It is during this dismal winter that proper UK Government support, crucially the job retention scheme, will be needed more than ever. And such support would, surely, mitigate to the maximum possible extent the damage to the UK economy from the coronavirus pandemic, which would be better ultimately for the public finances.

As an aside, the winter woe will be compounded by the UK Government’s seeming determination to leave the European single market on December 31, come what may, with all the damage to the economy and livelihoods that will bring.

In the context of the coronavirus pandemic and unemployment, Mr Sunak declared last week that “hard times are here” and “tough decisions lie ahead for all of us”.

Of course, tough decisions will lie ahead far more for some than others.

If Mr Sunak and the Conservatives cannot get their heads around what is the sensible thing to do with the furlough scheme, they should take a look at what is happening in Germany.

This week, German Finance Minister Olaf Scholz proposed to double the period over which state aid is paid under the country’s short-time working scheme, which has protected millions of jobs through this crisis. This proposal is aimed at preventing a further surge in unemployment amid the coronavirus pandemic.

The German short-time working scheme, known as Kurzarbeit, has long been in place but was extended in scope as the coronavirus pandemic hit earlier this year.

It enables companies to apply for state aid to keep workers on the payroll amid economic shocks and a lack of orders and avoid lay-offs, currently for a period of up to 12 months.

The German Government pays at least 60% of the lost income of affected employees where there is a temporary and unavoidable reduction of working time, which can be to zero, and enhanced protection introduced amid this crisis means that this support can rise ultimately to 80%.

Mr Scholz, of the centre-left Social Democrats, now wants to extend the scheme’s cover to 24 months, a move which has been welcomed by German industry.

Germany’s VDMA mechanical engineering association noted the programme was saving many jobs, as it did amid the global financial crisis and associated recession more than a decade ago.

Mr Scholz told Germany’s Bild am Sonntag newspaper that he wanted to give workers and companies more security around planning and ensure their personal safety, observing the pandemic would not “simply go away” in the next few weeks.

Two years looks like a proper timescale for support. And, of course, the more that economies reopen and recover, the lower the ongoing cost of such continuing support.

Yet Mr Sunak is determined to end the UK furlough scheme – even though he acknowledges the “hard times” he predicted are now here – having portrayed the fact that it will have been in place for nearly eight months by October as somehow generous.

It is Mr Scholz who is making the astute call.

The pandemic is not going to simply disappear in a matter of weeks. Yet it is only a matter of weeks until Mr Sunak plans to withdraw the main plank of UK Government support for people and businesses amid the coronavirus pandemic.

It is going to be a grim winter but the UK Government has it in its power to make it much less dismal than it will be if furlough scheme support is withdrawn.

Please, please Mr Sunak, consider the wise words of Mr Scholz. And look at his realistic time horizon for support.