UK business demands rethink on furlough scheme wind down

Leading lobby group warns Rishi Sunak’s summer statement plans risk mass unemployment

Business leaders have warned Rishi Sunak that his multibillion-pound summer statement plan to save jobs is failing to prevent an unemployment crisis from taking hold.

The British Chambers of Commerce (BCC) is demanding an urgent rethink from the chancellor, as the government starts scaling back its Covid-19 economic response, and warned that fewer than half of firms were planning to take up jobs support measures announced by Sunak last month.

Sounding the alarm as the furlough wage subsidy is wound down from this month, the leading business lobby group said the majority of firms were still suffering from cashflow problems – dramatically raising the risk of job losses across the UK.

In the first comprehensive assessment of business plans since the summer statement, the BCC said 43% of firms, in a survey of more than 500 businesses, planned to take advantage of the £1,000 per head bonuses being offered to firms which pledge to retain furloughed staff until January.

However, as many as 40% said they would not use the scheme, which was unveiled as the centrepiece of the chancellor’s tax and spending package with a price tag of up to £9.4bn.

The bonus plan is designed to smooth the transition away from the furlough scheme as it is scaled back from the start of August and closed entirely by the end of October.

The latest official figures show as many as 9.6m jobs at 1.2m companies have been furloughed in total since the onset of the pandemic in March, at a cost of £33.8bn to the exchequer. The winding down of the scheme forces businesses to contribute to keep workers on furlough from the start of this month.

Sunak has previously been warned by leading economics thinktanks that closing the furlough scheme at the end of October is a mistake that will trigger a dramatic rise in job losses, and that the measures in his summer statement are badly timed and poorly targeted.

Against a backdrop of rising job losses, the BCC also warned that 56% of businesses were planning not to participate in the chancellor’s new kickstart scheme. The £2.1bn package of support is designed to provide funding for hundreds of thousands of work placements for young people.

Despite forming a central plank of the chancellor’s Covid-19 recovery plan, almost a third of businesses said they were unaware of its existence. Despite facing severe cashflow pressure, almost two-thirds of firms said they did not intend to apply for grants to take on new trainees, while 65% won’t use grants to hire apprentices.

Evidence of the flat reception for the chancellor’s support measures comes amid growing pressure on the government to extend the furlough scheme beyond the end of October, as the British economy struggles to regain momentum following the sharpest downturn in 300 years during lockdown.

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Growing numbers of companies are reporting job losses as restrictions are only gradually lifted and the risks to public health from Covid-19 remain, depressing demand for goods and services.

More than half of firms in the BCC survey said their cashflow position had got worse since June.

Claire Walker, co-executive director of the BCC, said the low expected uptake of the government’s latest schemes show “they do not provide the right kind of support for many businesses at this critical time and a rethink is needed.”

A Treasury spokesman said: “This survey does not give an accurate picture of the take-up of the support announced last month as it was carried out before the publication of much of the relevant guidance and the engagement with business. It is also important to place the small sample size in the context of the 1.2m employers who have been supported through the furlough scheme and could therefore be eligible for the job-retention bonus.

“We are clear that our plan for jobs will support, protect and create jobs, helping ensure people and businesses can come back from this crisis stronger.”

Contributor

Richard Partington Economics correspondent

The GuardianTramp

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