End of furlough: ‘Time for the UK economy to put its big girl pants on’
This week, the government’s £70bn furlough support scheme comes to an end.
The end of the Job Retention Scheme, or furlough, will force organisations to make decisions regarding the future of furloughed employees.
City PM sought the views of a number of small business owners about whether now is the correct time to remove the support package and what might happen in the months ahead.
This is particularly relevant since a survey showed earlier today that about 70 per cent of all UK employers plan to cut jobs post-furlough. For employers expecting redundancies, 84 per cent have employees on furlough.
Scott Gallacher, director at private wealth manager Rowley Turton, worries the UK economy will experience a huge shock when the furlough scheme ends.
“Although 1m job vacancies mean the economy looks in great shape, the 1.3m people currently furloughed will be in other sectors with different skills,” he said.
“So, while a furloughed theatre actor might be able to play the part of a lorry driver on stage, they won’t have an HGV licence and can’t deliver fuel to a petrol station this weekend,” Gallacher said.
The disconnect between the jobs going and skills required to do them could prove significant.
Scott Gallacher
Meanwhile, Sarah Loates, who runs Loates HR Consultancy said she sees “significantly fewer redundancies among her SME clients as the economy glidepaths to the end of furlough.
“This is in stark contrast to August last year when it was a bit of a bloodbath. The turning point was when the Chancellor significantly extended the furlough scheme prior to Christmas, giving businesses the ability to plan based on fact and not guesswork,” she explained.
“The key issue we are seeing for SMEs now is cashflow, as for many businesses reserves have become depleted due to the pandemic, Loates added.
Moreover, recruitment of staff has plagued companies like Salcombe Finest, according to its founder and owner Kate Allen.
The end of furlough will hopefully alleviate some of the pressure on her company, she said.
“The time has come for the UK economy to put its big girl pants on. We are ready for the end of furlough.”
Non-sensical
To Jamie Thompson, who is a mortgage broker and founder of Jamie Thompson Mortgages, any decision to extend furlough would be “non-sensical”, given the record number of vacancies.
“Yes, there are still many people on furlough but if their employers have carried on for 18 months without them, perhaps their job isn’t going to be around for the long haul anyway, as sad as that may be,” Thompson said.
Staying in the mortgage market, Salma Kalisvaart, who is COO of Dashly.com, pointed out that a longer term concern for the end of furlough is for mortgage holders, those who have lied on government support to pay the bills.
“They could become the next generation of mortgage prisoners. There is a real worry that these people will simply move onto their lender’s standard variable rate at the end of their payment term rather than seeking a new deal,” Kalisvaart said.
Kalisvaart told City PM today: “While lenders look likely to profit from this, it’s imperative for government and the regulator to take action to protect the most vulnerable from even more financial pain beyond their control.”
Rachel Harvey, however, is more relaxed about the decision to end furlough.
The hand and footprint specialist at The Paint Box said: “As scary as the removal of this economic safety net is, I feel it’s time we try to rebuild.”
“I have been exceptionally lucky to have been able to take my staff off furlough already thanks to a summer of staycations and outstanding support from my customers.”
Jenni Letheren, the owner of JLL Accountancy & Admin, could not agree more. She thinks Rishi Sunak has made the right decision.
It is time for furlough to stop. Many organisations have been abusing this system.
Jenni Letheren
“It is right that it stops, and those that have taken advantage of it begin to repay the money to which they were not entitled,” she shared with City PM
“I also hope the Government has considered the additional pressure HMRC is going to be under to recoup these losses and does not expect an already stretched department to deal with this.”