Can business survive the finish of furlough?

Rishi Sunak has said the furlough scheme will end in October. Picture: PA Wire/PA Images/House of Commons

Rishi Sunak has said the furlough scheme will end in October. Picture: PA Wire/PA Images/House of Commons

PA Wire/PA Images/House of Commons

The clock is ticking towards the end of the furlough scheme – but hundreds of thousands remain dependent on the support.

Eleanor Pringle and Angus Williams investigate how jobs casualties could be avoided.

The furlough scheme has saved millions of jobs and business alike as the UK was plunged into turmoil as the coronavirus pandemic came knocking this March.

But, as chancellor Rishi Sunak has frequently pointed out, the government propping up the nation’s salary has to end at some point.

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Earlier in the year the chancellor announced that under the Coronavirus Jobs Retention Scheme, workers placed on leave have been able to receive 80% of their pay, up to a maximum of £2,500 a month.

Since July, these furloughed employees have been able to go back to work part-time.

In September, employers will have to pay 10pc of furloughed employees’ salaries – rising to 20pc by October.

By the end of that month it will have been phased out entirely.

Mr Sunak has said the measures are “generous”, with the eight-month wage bill pushing the UK to a £2 trillion public debt – 100.9pc of the country’s GDP.

A study released this week has highlighted that although the scheme has been a lifeline for some – a portion of businesses have not played by the rules of the scheme.

A study – the largest of its kind thus far – conducted by academics at the universities of Cambridge, Oxford and Zurich, found that the ban on working while furloughed was “routinely ignored”.

The study also found that a fifth of furloughed employees were explicitly told by their employers to carry on working while on leave – working on average 15 hours a week.

On top of this, seven in ten employees received a discretionary top up from their employer.

But it’s clear that despite some discrepancies a vast number of people in East Anglia are still relying on the scheme.

On average 30pc of the region’s workforce is still furloughed – often up one or two per cent on July’s figures.

In more urban areas such as Norwich the portion of the workforce still on furlough is lower – at 28pc in Norwich South and 26pc in Ipswich.

But in the coastal regions – which are more dependent on seasonal trade and the tourism sector – this number is higher.

In north Norfolk 35pc of the workforce remains furloughed, 30pc on the Suffolk Coast and 31pc in Waveney.

And across the board all of these are an increase in the figures from July, meaning the workforce is in fact relying on the scheme more heavily.

At Adnams – which is based in Southwold – the business made the most of the furlough scheme across its hotels, restaurants and breweries.

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Nick Attfield, director of properties, said: “I know the treasury have said that they don’t want to extend the furlough, but I certainly think there’s a good case for it. From our perspective, it’s very tricky when you’re trying to rebuild your business and then you’re going into the 2021 summer season and having to start from a zero-skill base.”

He explained: “The great thing about the flexi-furlough is it has allowed us to open steadily, open safely, test things work properly. Steadily build the business back up. In the majority of cases people are now working their normal hours.”

But Mr Attfield said he could foresee having to furlough staff again when the peak season ends at the beginning of October but there are many different factors to consider.

“That’s why the flexi-furlough until October is so vital to our industry,” he said.

“We just don’t know what will happen. We hope that through schemes like eat out to help out people have gained confidence. We know that lots of people will still want to come away on holiday to places like Southwold, Walberswick and Aldeburgh so that demand should remain.

“We’ve been blessed with great weather since we’ve reopened and that allows us to make really good use of all of our outside seating. There are all of these unknowns and that’s where flexi-furlough helps us so much.”

Mr Attfield said that the flexi-furlough will help businesses survive problem as the UK economy continues to recover from the pandemic in the future.

“That’s the whole point of it. It will smooth those bumps out for us and genuinely protect those jobs, because we know that they’ll be needed whenever demand comes back to whatever normal is,” he said.

Boris Johnson’s government is also facing political pressure to extend the scheme, with Ian Blackford, SNP leader in Westminster, warning it would be a “grave mistake” to end the programme in October.

But Chris Scargill, tourism partner at East Anglian accountants Larking Gowen, called for a reactive approach as opposed to a direct response.

He suggested the implementation of temporary furlough schemes in areas where local lockdowns are imposed.

Mr Scargill explained that the scheme could then function in the place of an insurance policy to allows firms to preserve jobs.

He said: “I think in the new trading world we are looking for people to work out their own economics – it’s far from ideal, but they’ll have to work out their own critical capacity issues.

“But I think when their ability to trade is suddenly taken away due to a lockdown, then having the staff available would be useful.

“There may be some insurance cover there, but historically insurance cover has been a problem historically. So government support would be useful.”

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