Firms sack thousands of UK workers but reward shareholders with public money

Firms linked to climate change and tax avoidance among those paying shareholders out of taxpayer money.

6 Aug 2020| News

Large businesses who received bailouts from the UK government have slashed nearly tens of thousands of jobs while paying billions to their shareholders.

This is according VICE News, which carried out an investigation into the use of the Chancellor’s Covid Corporate Financing Facility (CCFF), which Rishi Sunak set up to keep firms that make a “material contribution to the UK economy” afloat.

Figures obtained by VICE show that £4.26 billion has been loaned to companies that went on to pay – or had recently paid – an estimated £11.5 billion to their shareholders since the launch of the scheme on 17 March 2020.

These firms – which account for 30% of all corporations accessing the fund – were given a low interest rate on their borrowing of between 0.2% and 0.6%. Meanwhile, smaller and less powerful businesses were forced to access funds through commerical banks, facing interest rates of up to 6%.

A total of 26 companies receiving money from the CCFF have cut at least 42,848 jobs, the news source reported, including many of those who rewarded their investors with public money.

After being criticised for the lack of standards in place as to how public money should be spent, the Bank of England announced on 19 May 2020 that CCFF recipients taking out loans beyond 21 May 2021 must sign an agreement that they will restrain dividends and executive pay.

However, the many firms that took money out of the fund before this date are not being asked to meet the same standards, and some of those who signed the agreement seem to be ignoring it.

Honda, for instance, took £185 million from the CCFF and was encouraged to show restraint when it came to dividends, which did not stop it from paying £363.5 million to its shareholders soon after.

Other companies accessing the fund after the new restrictions were put in place incuded Mitsubishi, which was given £300 milllion and paid its shareholders £1.49 billion less than a month later. Amcor took £120 million and paid £121 million out in dividends.

Among other receipients of public money were Baker Hughes, an American oil company, which accessed £600 million from the CCFF and then paid its shareholders £91.9 million. Fellow oil giant, Schlumberger paid out £135.2 million in dividends after taking £415 million from the fund. The next day it announced it would cut 20% of its workforce – 21,000 jobs worldwide.

Multinational IT firm DXC accessed £600 million in public money just after it had paid £41.4 million to its shareholders. It later announced 4,500 jobs would be lost.

A number of airlines were also bailed out, causing concerns not only about the use of public money to reward the rich but also UK investment in polluting industries.

Easyjet took £600 million from the CCFF, paid £174 million to its shareholders – £60 million of which went to founder Stelios Haji-Ioannou, who is already a billionaire – and told staff to take unpaid leave. It also warned workers their pay may be frozen. Last month, it emerged that the company was also going to cut 4,500 jobs – and it was identifying people for the axe using sickness records.

Ryanair took £600 million and British Airways accessed £300 million while planning to sack up to 12,000 people. Wizzair will make cut its staff by 20% after taking £300 million in public funds.

“The government has handed a huge blank cheque to private businesses while everyone else struggles with the deepest economic crisis on record,” economist Grace Blakeley told VICE News.

“It’s working people who are struggling most with the impact; many unemployed people are struggling to access universal credit and are facing homelessness and poverty as a result,” she added.

“Meanwhile, the government is throwing money at corporations, many of whom are behaving as though they have no responsibilities to the rest of society, without which they could be insolvent by now.”

Economic Ann Pettifor warned that UK citizens are not just being stripped of their money by these firms, but will also be punished by government policy later.

“Taxpayers will pay twice over for the Bank of England’s virtually unconditional largesse, when politicians once again impose deflation and austerity,” she said.

Meanwhile, VICE News reported that at least ten companies that have accessed the CCFf have links to tax havens or tax avoidance.