Companies bailed out with public money have paid shareholders billions of pounds in dividends while cutting tens of thousands of jobs in the UK, a VICE News investigation can reveal.
Campaigners and commentators have criticised the bail-out for being offered with minimal conditions, and say that companies have put shareholders’ interests above those of their employees.
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On the 17th of March, with the economic implications of the coronavirus becoming clear, Chancellor Rishi Sunak announced the launch of the Covid Corporate Financing Facility (CCFF) – a scheme to support large firms that make a “material contribution to the UK economy”.
VICE News has found that 30 percent (21) of the companies currently accessing emergency funds through this facility have paid out an estimated* total of £11.5 billion in dividends to shareholders and investors.
Of those, at least eight companies paid out dividends after receiving government money. Three more companies accessed government funds shortly before a dividend pay-out. A further ten companies paid out dividends and later claimed government support. In contrast, 21 companies receiving government funds through the CCFF have cancelled their dividend pay outs this year.
In total, 26 companies receiving financial assistance through the CCFF have cut jobs or announced plans to make lay-offs, totalling at least 42,848 UK jobs. Of the companies issuing dividends during this period, three have also announced redundancies totalling around 6,000 jobs.
The CCFF is only open to large companies that were in decent financial health before the outbreak of the pandemic. Those eligible for the scheme are able to issue commercial paper, a form of debt that is then bought by the Bank of England, injecting cash into the companies.
All of these loans come with interest rates of between 0.2 to 0.6 percent. Smaller businesses not eligible for the CCFF loans have to access government-backed funds through commercial banks, with interest rates of up to 6 percent.
Author and economist Grace Blakeley told VICE News, “The government has handed a huge blank cheque to private businesses while everyone else struggles with the deepest economic crisis on record. The fact that these companies have used that cash to pay dividends rather than to support workers or undertake investment is unconscionable. This is corporate welfare, plain and simple. Meanwhile, the real welfare system is straining under the huge pressures of mass unemployment.”
On May 19th, the Bank of England announced any company wishing to draw from the CCFF with a term going beyond 21st May 2021 must sign a letter committing to restraint where paying dividends and executive pay were concerned whilst the facility was being used. This did not apply to those who drew before this date.
COMPANIES TAKING GOVERNMENT FUNDS BUT PAYING DIVIDENDS AND CUTTING JOBS
DXC, an American multinational IT company, paid out dividends worth £41.4 million in April, before announcing worldwide job cuts of 4,500. In June, the company accessed £600 million in government funds via CCFF. The company has announced that it will be cancelling its dividend payments for the rest of the year. DXC did not respond to requests for comment.
On the 20th of March, EasyJet paid out £174 million in dividends to its shareholders, including £60 million to its founder, billionaire Stelios Haji-Ioannou.
Just a day previously, it was reported that the company was considering a freeze on planned pay-rises and asking staff to take three months of unpaid leave as it struggled to weather the profound economic impact of the pandemic.
In April, EasyJet accessed £600 million from the CCFF. In July, it was reported that the company was using sickness records to determine job cuts of up to 4,500.
In a statement, EasyJet said: “We are committed to working constructively with our employee representatives across the network, with the aim of minimising job losses as far as possible. We are focused on doing what is right for the company and its long-term health and success so we can protect jobs going forward.”
Oil giant Schlumberger, which posted revenue of $33 billion (£25 billion) in 2019, had accessed £415 million in funds through the CCFF by the 24th of June this year. In May, it was reported that up to 90 jobs would be lost at a Schlumberger subsidiary in Scotland. On the 24th of July, Bloomberg reported the company would be slashing 21,000 jobs (20 percent of its workforce) globally. One day earlier, on the 23rd of July, the board voted to pay out the equivalent of £135.2 million in dividends. Payments are due to reach investors on the 8th of October.
When contacted for comment, Schlumberger directed VICE News to its Q2 results, which show the company reported $5.2 billion (£3.9 billion) in worldwide revenue in the second quarter of 2020.
“We’re experiencing the deepest economic contraction in at least a century, and in the UK unemployment is expected to reach 12 percent – a figure not seen in decades. 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,” said Grace Blakeley.
“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. This is indicative of a deeply unhealthy corporate culture – a problem the government could be tackling by attaching the most basic conditionalities to its lending.”
COMPANIES FAILING TO SHOW RESTRAINT
In May of this year, the Bank of England called on companies accessing funds through the CCFF to show restraint when paying out dividends. Going forward, those accessing funds or extending the duration of their loans have been asked to commit to refrain from paying dividends.
A spokesperson for HM Treasury told VICE News, “We have acted at unprecedented speed to support jobs and the economy […] We announced in May that firms wishing to use the scheme for longer than a year must restrict dividends and senior pay, so that funding provided is prioritised for protecting jobs and keeping firms operational.”
Companies which have accessed funds and paid out dividends since the Bank of England encouraged them not to include Honda, which paid out the equivalent of £363.5 million in dividends for Q4 2020, having accessing £185 million through the facility. Honda did not respond to requests for comment.
A spokesperson for American oil giant Baker Hughes, who confirmed the company accessed £600 million from the CCFF in April and paid out the equivalent of £91.9 million in dividends on the 23rd of June, told VICE News, “Our positive free cash flow has allowed us to maintain our dividend pay-out during this downturn. The CCFF is a loan and will be repaid in full with interest.”
Car giant Mitsubishi accessed £300 million in funds through the CCFF before the 3rd of June and paid out the equivalent of £1.49 billion in dividends on the 22nd if June. Mitsubishi did not respond to requests for comment.
Amcor, a global packaging company that reported $13 billion (£9.8 billion) in sales in 2019, accessed £80 million in funds through the CCFF before the 3rd of June. Between the 2nd and 9th of July they increased their fund access to £120 million. On the 17th of July they paid out £121 million to shareholders.
An Amcor spokesperson said, “Like many businesses affected by the COVID-19 pandemic, Amcor UK followed the UK government’s process to assess eligibility for a short-term repayable loan. That process determined that Amcor UK was eligible for a repayable short-term loan under the Covid Corporate Finance Facility. We have been repaying that loan and expect to have repaid it in full this week.”
Figures released by the Bank of England on the 30th of July indicate Amcor did repay their loan. However, regardless of repayment, critics argue that prioritising corporations over working people speaks to an inherent imbalance within society. They point to the extremely favourable terms upon which the loans were given, and the potential cost and backlash that may result from them.
“These [CCFF payments] are by no means run-of-the-mill commercial loans,” explains Frank Van Lerven, a Senior Economist at the New Economics Foundation. “The Bank of England directly finances these loans with newly created public money, at exceptionally low rates of interest, all backed by the taxpayer.”
“Taxpayers will pay twice over for the Bank of England’s virtually unconditional largesse, when politicians once again impose deflation and austerity,” says economist and author Ann Pettifor. “But the public are wiser and angrier in 2020 than in 2009.”
ENVIRONMENTAL CONCERNS
VICE News found that at least ten companies with links to tax havens or tax avoidance have received money via CCFF. Three of these – Wizz Air, EasyJet and Schlumberger – are from major polluting industries.
As reported by VICE News in July, The UK Youth Climate Network projected a video onto both the Bank of England and the Treasury criticising the fact that the CCFF has made money available without economic or environmental stipulations.
Governor of the Bank of England, Andrew Bailey, has defended delaying a review into implementing climate stipulations in BoE financing. At the beginning of July, Bailey said, “In such a grave emergency affecting this country, we have focused on the immediate priority of supporting the jobs and livelihoods of the people of this country.”
Of the 68 companies currently in receipt of funds, four are airlines, which have received a total of 10 percent of the funding given out by CCFF.
Ryanair, which received £600 million through the scheme, was named one of the top ten polluters in Europe in 2019, while EasyJet – which also accessed £600 million through the CCFF – successfully lobbied against environmental regulations for the airline industry earlier this year. British Airways, which accessed £300 million, have come under fire for misusing the job retention scheme, and plan to lay off up to 12,000 workers. Wizzair, which drew £300 million from CCFF, has announced plans to make one in five of its workforce redundant, while effectively only paying a 3.5 percent tax rate since 2015.
On the 21st July, pressure group Plan B – which successfully challenged the government over the planned expansion of Heathrow Airport – launched a formal legal challenge against the government over its failure to consider consequences for the climate emergency in its approach to COVID-19 economic recovery.
“The Bank of England talks a big game about a green recovery and building back better, but it’s not putting its money where its mouth is,” says Simon Youel, Head of Policy & Advocacy at Positive Money.
“Instead,” Youel says, “the Bank has been bailing out big polluters and bad bosses with no strings attached. The Bank’s argument that it’s prioritising jobs might hold up if these corporations weren’t also paying out dividends and laying off workers, precisely because of the lack of conditions to the billion of pounds of support they’re getting. To save jobs and the planet, we need to take this opportunity to demand something in return.”
*All dividend payouts in this article are estimates based on the reported dividend set by each company, times the number of outstanding shares that qualify for a payment in the most recent financial report. For companies that announced a share buy back scheme that applies within this period, the total number of shares to be bought back were subtracted from the total of outstanding shares.
