The chancellor has extended the furlough scheme through to late autumn, pointing the way towards a very long road to unlocking the lockdown. Key industry figures offer their responses to a popular but economically worrying initiative.
Industry thought leaders and employers have issued a cautious welcome to the chancellor’s surprise extension of the government’s furlough scheme through to the end of October, despite recently saying that he was preparing to ‘wean’ workers and businesses off the programme.
The announcement by Rishi Sunak, which has seen the government pay the wages of 7.5 million workers at a cost estimated by the Institute for Fiscal Studies to ultimately exceed £80bn, not only confirmed the four month extension but also the retention of the 80 percent government contribution putting a halt to speculation that it would be cut to 60 percent.
Answering widespread requests from throughout British industry for greater flexibility, Sunak also stated that from August, furloughed workers will be able to return to work on a part-time basis.
ITV News Political Editor Robert Peston described the furlough scheme as “state support for work on a scale this country has never seen” and many believe that extending and amending the scheme in such a way is an indication of how long the government believes the economic lockdown will last or more precisely when the thaw will start.
Addressing MPs, the vast majority of whom were observing remotely, the chancellor said: “We have stretched and strained to be as generous as possible to businesses and workers. It is the right thing to do and the cost of not acting would have been far higher but it is not something that can continue indefinitely into the future.”
The timing of the announcement is significant coming as it does ahead of a deadline this weekend for companies to avoid opening redundancy consultations for job losses at the end of June. However with the part-time scheme still ten weeks away it is feared that some employers may still feel the need to make extensive redundancies, shifting the focus onto the growing numbers applying for Universal Credit.
With the crisis expected to cost the exchequer close to £300bn in 2020, increases in direct and indirect taxation alongside a two-year public pay freeze and an end to the triple lock on state pensions are being discussed by the Treasury.
The size of the debt mountain will see the country with a forecast £337bn budget deficit compared with £55bn in the March 2020 budget. The worst case L shaped economic decline will see the deficit rise to £516bn reaching a cumulative £1.19 trillion over five years.
John White, CEO, bacta
“Certainly the headline news is very positive, providing comfort and support to businesses and staff through to October. However, it is a bit of a cliché, but the devil really is in the detail. The chancellor has referred to business sharing the costs and it remains to be seen exactly how that will be configured and what he means by sharing. The furlough scheme has to be run in parallel with the opening up of the economy. The chancellor needs to avoid furloughing bleeding into mass redundancies. Instead it represents a financial safety net for individuals and a lifeline for business. Bacta has argued that any flexibility in terms of allowing part time work, must be introduced ASAP and government cannot escape from the fact that for our seasonal businesses, which could be deprived of any meaningful income until Easter 2021, extending furloughing will not be enough. This important part of the leisure economy will need continued financial support through to at least mid 2021.”
Peter Hannibal, CEO, The Gambling Business Group
“The Gambling Business Group wrote to government in April asking for some form of ‘back to work subsidy’ to allow businesses to progressively work up to full capacity and I am delighted that they have responded so positively. Many owners and proprietors will be sighing with some considerable relief as until now, it has been difficult to see how business could be made to work when fully exercising the reopening restrictions. This represents great news enabling businesses to reopen at less than full capacity without sustaining huge losses and as a consequence prevent thousands of job redundancies. This is absolutely the right thing for government to be doing to protect jobs, protect businesses and to enable the economy to get back on its feet as quickly as possible and head towards pre-Covid- 19 levels.”
Sascha Blodau, General Manager, Gauselmann (UK)
“Extending the furloughing scheme is an important initiative from the government that will help the UK based businesses that are part of the Gauselmann Group prepare for the challenges that lie ahead. As an organisation employing 2,400 people in the UK and with a presence in over 100 towns and cities we are eager to continue to contribute to the wellbeing of our customers and employees as well as to the health of the national and regional economies in which we operate. The fact that we are a multinational business means that we have a dialogue with sister companies operating in countries that have come out of lockdown at an earlier stage which means that we are able to learn from their experience.”
Jason Frost, President, Euromat
“Speaking as President of Euromat but also as a UK-based AGC operator I think we have to examine in forensic detail what the chancellor has outlined – because it is the specifics that will determine exactly how beneficial the extension is and how it is tapered. However taking a broader European perspective it is clear that the UK government has adopted a series of initiatives that are far more business friendly than many governments on the continent. As well as the extension of the furlough scheme there have been a series of initiatives across business rates and bounce back loans that are both costly to the treasury and economically progressive. Taking Holland as an example we were told on yesterday’s Euromat webinar call that businesses there have only received the furlough money. I have got a strong affinity with the coastal sector of our industry and I fear for the prospects of businesses that if they are unable to open in the summer will have to endure nine months without income. Perhaps there’s a case for a more targeted use of support funds to those sectors that are in most need?”
Emma McClarkin, Chief Executive of the British Beer and Pub Association
As a sector employing 900,000 people and where 90 percent of the staff have been furloughed, we cautiously welcome the extension and increased flexibility of the Job Retention Scheme. The increased flexibility allowing for part-time working beyond July is imperative. However, if pubs and breweries are expected to pay a proportion of furlough costs whilst remaining closed, it could still lead to significant job losses for our sector. We continue to urge the government to bridge the significant gaps in the current financial support our sector faces as we ask them to help us get back on our feet whilst we re-open under social distancing conditions. This means removing the £51k rateable value cap on grant eligibility as well as extending grants, improving access to loans, and further support for brewers on beer duty.”
Kate Nicholls, Chief Executive, UKHospitality
“An extension of the scheme is a sensible, positive and timely move. The full 80 percent may need to be extended past July for some businesses in sectors like hospitality that will still operate at much reduced levels of trade, or not yet be able to open. Increased flexibility for hospitality will be vital. Hospitality businesses are not able to go from standstill to full capacity overnight. The additional flexibility being introduced to the scheme will allow our workers to return to work in a safer, graduated way – that is crucial to help the government to safeguard public health, jobs and businesses.”