“I cannot save every business, I cannot save every job,” said Rishi Sunak. We knew that, of course, because the chancellor has said it repeatedly since March and because he’s already on course to borrow about £370bn this financial year, a staggering sum. We can, though, say this: the new job support scheme (JSS) looks extremely fiddly, which may not help the its aim.
Giving a worker 33% of hours while paying 55% of his or her wages (which is how the figures work at the bottom end of the sliding scale) won’t appeal to every employer. Yes, those thinking about long-term training and recruitment costs will be attracted. The need to keep skills within a company matters.
In sectors such as hospitality and retail, where staff turnover can be heavy anyway, the story may be different. Those are industries most exposed to new Covid restrictions and the Resolution Foundation made a few detailed points about structure.
First, at a salary of £17,000 a year, “it would cost an employer 33% more to employ two people half-time on the JSS than it would to employ one person full-time”. Some employers will spread the work around; some won’t.
Second, remember the £1,000-a-head job retention bonus that firms can claim at the end of January if they bring back an employee from furlough. The JSS lasts until April. Will the misalignment merely move the feared furlough “cliff edge” from the end of October to the end of January?
And what’s to stop an employer cutting a workers’ hours without placing them into the JSS (thereby avoiding the top-up element) and then bagging the £1,000 in January? As the foundation says, “this risks creating difficult conversations between firms and their employees” since the workers would risk losing out on both the government’s and the company’s payment to cover lost wages.
We’ll have to see how these “flaws”, as the foundation calls then, play out in practice. The JSS will clearly have some effect in lessening the October risk. Some jobs will be saved – the CBI thinks “hundreds of thousands”. But, sadly, the overall path for unemployment seems set: up sharply soon.
Cineworld’s fate could be a cliff-hanger
The outcome of Cineworld’s coronavirus struggles is about as clear as the plot of Tenet, this summer’s time-shifting spy release: the action could move in either direction.
On one hand, the directors think Cineworld should be able to stay within current borrowing facilities for at least 12 months, despite a thumping first-half loss of $1.6bn (£1.3bn) and a two-thirds fall in revenues as multiplexes had to close temporarily.
On the other, the auditors point out that debt covenants will be breached at the end of the year and, since the group hasn’t yet secured waivers from lenders, there are “going concern”, or survival, doubts. The shares fell 15%, valuing a company with £6.3bn) of net debt, at just £600m.
In the short-term, a lot hinges on when cinemas in New York and California join the rest of the US in reopening – about 200 of Cineworld’s global estate of 778 are in those states. If reopening happens next month, it’ll be in time to catch Christmas releases.
But there are deeper worries in the age of Netflix and Amazon Prime Video. Odeon owner AMC Theaters has signed a multi-year deal with Universal to cut its exclusivity on new releases to 17 days, versus the traditional window of two or three months. It will get a cut of on-demand rental revenues in exchange, but a big shift in the economics of film distribution may be on cards; it may not be favourable to cinemas.
Mooky Greidinger, Cineworld’s deal-doing chief executive, is trying to hold the line. “We see the window as an essential part of our business,” he says. The big screen is better than a TV, he argues, just as going to a restaurant and ordering a takeaway are different experiences.
Well, maybe. But the on-demand threat is one more worry for lenders. So is Cineworld’s legal battle with Cineplex, the Canadian business it pulled out of buying for $2.1bn when Covid struck. The only uncertainty is this: when you load up with debt like Cineworld has done, you’re inviting trouble.