The financial plight of limited company directors has been raised by the Tory chairman of the Treasury select committee. Mel Stride, a former Treasury minister, said chancellor Rishi Sunak needs to view company directors as a tranche of people who have ‘slipped through the net’ of all the other largesse on offer to help the economy through the pandemic lockdown restrictions.
Stride was financial secretary to the Treasury under then-chancellor Philip Hammond. He says owner-directors of small firms, who often pay themselves using dividends, have no access to income support under the Coronavirus Job Retention Scheme, and may not be entitled to Universal Credit. In quotes to the FT this morning, he said: “[Rishi Sunak] has done a great deal to support the economy, but he should not be putting away the ironing board just yet.”
There are always winners, and in the WFH era, Netflix is one of them after it emerged that twice as many subscribers signed up to its streaming service as anticipated for the first quarter of the year. It’s hardly surprising given that across the western world, millions of people are furloughed and therefore searching for ways to fill their empty days in the confinement of their homes.
The numbers were pretty mind-blowing: 15.8 million subscribers registered in the three months to the end of March, against Netflix’s own target of ‘just’ 7 million. Shares in the streaming giant rose by around 5% before falling back again – investors will have largely ‘priced in’ the anticipated surge in numbers as soon as government’s began to order people onto their couches.
Some 185,000 companies i the UK applied to the furlough scheme on its first day, claiming around £1.5 billion of state aid to keep 1.3 million workers on the payroll instead of making them redundant. It is our view that the furlough scheme may eventually come to be seen as a monumentally abused plank of state coronavirus support, given there is no corporate means-testing required to access the cash. That means thousands of firms that have significant cash reserves are outsourcing to the state due to the crisis as a bit of a bonus to their balance sheet.
The bill will rack up fast: these figures were only from the first 24 hour of the scheme’s operation, and the Office for National Statistics has published a scenario in which almost a third of the workforce is furloughed for three months, costing the exchequer £42 billion. Which gives us the second part of our view – the furlough scheme provides nice state-support optics, but will eventually be revealed to have propped up many jobs which will inevitably turn into real redundancies once the pandemic is over and the economic devastation is shown in its full horror.
Every firm is going to need to trim some fat, and that furlough bill will have done very little except add to the national debt in considerable style.