COVID-19: Surge in furloughs among German firms as lockdown extends

Jill Petzinger
·Germany Correspondent, Yahoo Finance UK
·2-min read
28 November 2020, Lower Saxony, Hanover: Tables and chairs are placed in front of a closed restaurant in the city centre. The federal and state governments have decided on a partial lockdown. Restaurants, bars and pubs must remain closed. Photo: Hauke-Christian Dittrich/dpa (Photo by Hauke-Christian Dittrich/picture alliance via Getty Images)
28 November 2020, Lower Saxony, Hanover: Tables and chairs are placed in front of a closed restaurant in the city centre. Photo: Hauke-Christian Dittrich/picture alliance via Getty Images

The proportion of companies that have put their staff on short-time hours rose to 28% in November, from 24.8% in October, according to the Munich-based Ifo economic institute.

Germany’s partial lockdown to try and combat the second, bigger wave of COVID-19 infections has meant restaurants, hotels, bars, as well as entertainment and sports venues have been closed for the entire month of November. The government agreed with the states to extend this shutdown until 20 December — and potentially January too.

READ MORE: Coronavirus: Germany to extend semi-lockdown until 20 December

Perhaps unsurprisingly, 91% of businesses in the hotel, travel agency and tour operator sectors that have put their staff on short-time hours. Nearly 72% of firms in the food-related sector are using the furlough scheme.

One bright spot was in the manufacturing sector, for example the car industry, where the number of workers on furlough decreased significantly in November.

Germany’s short-time hours, or Kurzarbeit, scheme normally means the government pays 60% of a worker’s salary to their employer. That amount increases to 70% if workers are on Kurzarbeit for more than four months, and around 80% after seven months.

READ MORE: Germany extends short-time work support until end of 2021

Germany has seen coronavirus cases soar in the past two months to a total of 1.05 million this year. While the death toll from the virus, at a little over 16,000, remains lower than many other European Union countries, the nation’s intensive care units are getting worryingly full. In Berlin, three hospitals said over the weekend that their ICU’s were nearly at full capacity.

The government agreed to an initial spend of €10bn (£8.9bn, $11.9bn) at the start of the partial November lockdown to cover losses for companies forced to close their doors, saying they would compensate them for up to 75% of lost revenue in the month — based on their revenue in the same month last year.

However, Merkel’s chief of staff Helge Braun told Handelsblatt in an interview published today (30 November) that this model of fiscal support had been an “ad hoc” measure and that “in the long run, revenue cannot be the central criterion” for how to support shuttered firms.

“We have to work out more targeted help by January,” Braun said. He said that the current compensation is costing the federal government about €15bn a month, adding that, "the state is not able to act indefinitely.”

Braun suggested that from January onwards, the government will offer bridging loans to companies instead.

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