UK ministers have been warned that hundreds of thousands of jobs are at risk after the furlough scheme that helped pay the wages of more than 9m workers during the coronavirus lockdown begins to wind down, even as parts of England face new lockdown restrictions.
The easing of the government’s furlough scheme is part of a broader effort to return the British economy to a degree of normality. From Saturday, employers will be encouraged to bring more staff back to their offices to try to boost hard-hit sectors such as high street retail and dining.
Companies will also start paying national insurance and pension contributions for furloughed staff as part of a phased ending of a scheme that has so far cost the taxpayer more than £31bn.
But, with many parts of England facing the prospect of new lockdown restrictions as coronavirus cases rise, MPs and business groups have warned that the move could backfire. They argue that further economic support is needed for local areas that have been forced back into lockdown and for sectors that are still struggling to recover from the effects of the pandemic.
The changes on August 1 mean that for the first time since the government’s furlough scheme launched in April, businesses will need to carry some of the costs of workers who were sent home during lockdown. The average cost to companies will be about 5 per cent of pre-furloughed pay.
Anneliese Dodds, shadow chancellor, on Friday warned chancellor Rishi Sunak that he had “24 hours to change course” or risk the loss of huge numbers of jobs. Ms Dodds warned that Mr Sunak’s plan to withdraw the furlough programme was a “historic mistake that would hand P45 notices to workers across the country”.
She called the easing of the scheme “a python-like squeeze on jobs” for the industries worst hit by the crisis.
The Federation of Small Businesses found that about a fifth of companies expected to cut jobs in the next three months. This comes after nearly a quarter of companies said they had already made redundancies during the pandemic.
“On the day full furlough ends, we have confirmation that many parts of the sector remain closed — bowling, casinos, nightclubs, soft play, weddings,” said Kate Nicholls, chief executive of UKHospitality, which represents the leisure industry. The government on Friday postponed the reopening dates for these venues by two weeks.
Events and entertainment are vital to underpin profitability, Ms Nicholls added, “so the situation remains precarious”.
UKHospitality estimates that half a million jobs are at risk in the sectors without a firm opening date. But it said that this could rise to a million across the wider leisure sector “with prolonged uncertainty and no change on the furlough scheme as a result of a pause in reopening and any knock-on effect on consumer confidence”.
Furlough “has cushioned the blow, but when it ends we will see significant job losses and many insolvencies”, warned Adam Marshall, director-general of British Chambers of Commerce.
He added: “The autumn and winter ahead will be difficult, and the government will need to be ready to respond if it becomes apparent that particular communities and sectors are especially hard-hit.”
The government is hoping to protect some jobs with a one-off payment of £1,000 for every previously furloughed employee brought back and still employed in January next year.
But hopes that more workers could be encouraged to return to offices after the relaxation of working from home guidance from this weekend have been undermined by warnings from large companies such as NatWest and Google that most of their employees would not return until next year.