A new study suggests that as many as one in four firms using the government’s job retention scheme will struggle to contribute to furloughed workers’ salaries from August.
The Institute of Directors (IoD) survey of nearly 700 company directors found that only about half of those using the scheme said they could provide 20 per cent or more towards furloughed workers’ full-time salaries between August and October – with a quarter of those surveyed saying they couldn’t afford any amount at all.
Over a third of those using the scheme said if it was allowed, they would bring most of their furloughed workers back part-time.
In a bid to protect jobs the IoD has called for as much flexibility as possible in the system.
“The furlough scheme is protecting millions of jobs,” commented Jonathan Geldart, IoD director general.
“Business leaders know that the government’s support can’t be infinite, but the ugly truth is that if there’s no money coming in the door, many firms will be forced to make difficult decisions come August.
“Directors will be fighting tooth and nail to avoid this scenario. There is hope that as more areas of the economy return to work, more companies can keep people on board.
“However, despite best efforts, many firms simply won’t be able to work at full capacity for the foreseeable future and there’s no magic wand to lift demand back up again.”
He called on the government to ameliorate the situation. “The government must soften the blow by introducing as much flexibility as possible into the furlough system. The more flexible the scheme is, the better firms can recover, and the fewer jobs will rely on state subsidy.”
The furlough scheme, paying wages of workers on leave because of coronavirus, will be extended to October, with employees receiving 80 per cent of their monthly wages up to £2,500. But difficulties could arise from August, when companies are to start sharing the cost of the scheme.
‘Early scheme removal could be disastrous’
“This report bears out what we have been saying for weeks now, that removing the furlough support before business has had a chance to recover even slightly could be disastrous for jobs and workers,” commented Unite general secretary, Len McCluskey.
“The next phase of furlough has to be a mix of continued taxpayer support to business, plus money into the pockets of workers so that they can keep a roof over their head and food on the table, and a comprehensive job creation scheme to recover our economy.
“These have to go hand-in-hand, and have to be in place soon and remain for some time to come. There has been a huge national effort in the past two months to avert mass unemployment. This must not be sacrificed in any rush to exit the jobs retention scheme.”
Compiled by Amanda Campbell @amanda_unite