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INDUSTRY NEWS
Extension to Furlough Scheme could
cost the Government £70 million
In an unexpected move the
Chancellor has extended
the current Furlough
scheme until the end of
October but he now has
a huge challenge to get
this right, say leading tax
and advisory firm Blick
Rothenberg.
Heather Self a partner at the firm said:
“He needs to achieve a “Goldilocks” effect
– not too hot, and not too cold. If he provides
too much it will be very expensive and may
discourage firms from reopening. If he provides
too little thousands of people could lose their
jobs.
She added: “It is going to be a turbulent
time for the labour market in the Autumn.
Some sectors, such as the hospitality and
tourism sector, are likely to see significant
redundancies, while others such as construction
and financial services will be relieved to see
a gradual winding-down of support.
From the announcement,
we now know that:
Support will be continued to the end of July
in full, with employers required to contribute
after that date.
Part time working will be permitted, but only
for some employees
The same level of overall support – 80% of
wages up to a maximum of £2500 a month
– will be maintained
Heather said: " As the furlough scheme is
reduced the Government needs to incentivise
business and come up with creative ideas
about how business can keep going and
retain staff.”
She added: “The Chancellor could not go on
paying out billions of pounds indefinitely, and
everyone understands that, but there needs to
be much more joined up thinking between
Government and business.”
So far, some 7.5m employees have been
furloughed, at a cost approaching £10bn.
The expected costs to the end of July are likely
to be around £50bn, with the extension at a
reduced level to the end of October perhaps
costing a further £20bn. These are very
significant sums, amounting to around
10% of total Government receipts.
As Britain seeks to get back to work, the
pressures on different sectors will be very
uneven. While some sectors, such as
construction and financial services, are getting
back to work, others such as leisure and
hospitality will be much slower to recover.
And the position in the tourism and heritage
sectors is likely to become critical if they lose
the whole of the Summer season.
Heather Self said: “Enabling part time work is
welcome, as it will permit a gradual return to
work. But the Chancellor said this would only
be available to businesses “currently using” the
scheme – it is not clear what the cut-off date
will be for businesses still considering whether
they need to furlough employees”
“The Chancellor needs to pay attention to the
needs of different sectors, difficult though this
may be. Leisure and hospitality businesses are
unlikely to be able to cope with reopening fully
by the end of July, and may need to
contemplate redundancies”
“Additional support beyond the furlough
scheme will be needed for a long time –
whether loans such as the CBILS scheme,
or grants, or incentives such as an increase
in the Employment Allowance to encourage
employers to maintain their staff levels,
or even take on new employees.”
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