Doing what it takes
Protecting firms and families from the economic impact of coronavirus
Recommendations from Resolution Foundation

The coronavirus health crisis is now a full-blown economic crisis, and one that may last for much more than a few months. Firms will go bust and unemployment will rise. The majority of this economic damage will be driven not by the direct impact of coronavirus itself, but by the necessary measures – such as social distancing – that we put in place to respond to it.

Lower earners are likely to be hit most swiftly, in stark contrast to the 2008 financial crisis. Sectors already heavily affected have typical weekly pay of £320, compared to £455 for the economy as a whole. Less than one-in-ten of those in the bottom half of earners say they can work from home, making it much harder for them to protect their incomes in the face of social distancing measures. Those in the most at-risk sectors and occupations also have less to fall back on, being around 25 per cent more likely than average to live in families with no savings at all.

This is the backdrop to an urgent need for the Government to step up its economic response. In recent days, the Chancellor has set out additional measures to those announced in the Budget, with a continued focus on subsidised loans and direct cash payments to firms. However, much bolder steps to support family incomes are now needed, as the Chancellor himself has set out. That is crucial not only to avoid hardship, but to reduce the depth of the crisis by reassuring families that they will not suffer deep and long-lasting hits to their income.

We propose a broad and radical approach in three areas: relatively simple extensions of sick pay itself, much bolder moves to aid the retention of workers by struggling firms, and a stronger social security safety net. This three-part package would amount to a bold response to a very serious economic crisis. It would target the core problems that the nature of this shock is posing to individual firms, families and the economy as a whole. And crucially, it rests on measures that are not always easy but which can actually be taken, and taken swiftly. Now is the time to act.


  • On Statutory Sick Pay (SSP), the Government should extend it to the 2 million employees who earn less than £118 per week (£120 from April) and are ineligible. This would cost around £200 million. The Government could go further and make SSP more generous, but only if it met the costs of that increase, for small and medium-sized firms at least. Increasing SSP from £95.85 to £160 per week would ensure it covered half the earnings of employees that rely on it, up from the current third, and cost a further £800 million for small and medium-sized firms.
  • The Government should introduce a new Statutory Retention Pay (SRP) scheme in which people who don’t have work to do stay formally employed by their firm, but with a significant amount of their pay covered by the state. Firms would continue to pay workers at least two-thirds of their previous wages via their payroll, with the state providing a rebate for those payments at a cost of £4 billion for an initial six months if 500,000 employees were involved, and £8 billion if a million were. A simpler flat-rate payment of £151 per week would cost £3.6 billion if 1 million workers were involved.
  • To protect families affected from hardship, and strengthen the automatic stabilisers that support demand in the economy, the Government also needs to strengthen the social safety net. The main adult rate of out-of-work support in Universal Credit (UC) and other benefits should rise by one-third, to £100 per week, with equivalent increases in young-adult and couple rates. This would cost £10 billion over a year. The Government could go further and target a 10 per cent uprating of other elements of the means-tested benefit system (UC and tax credits), which would bring the total cost to £13 billion.