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How many jobs could be lost when furlough ends?

RISHI SUNAK’s big spend Budget revealed earlier this week that schemes such as furlough and SEISS are here to stay beyond the proposed end of lockdown restrictions. But many are still fearful of what’s to come when the Chancellor finally ends the support.

The Chancellor has made no secret of the fact he cannot save every job. Rishi Sunak said: “Our Covid support schemes have been a lifeline to millions, protecting jobs and incomes across the UK. There’s now light at the end of the tunnel with a roadmap for reopening, so it’s only right that we continue to help business and individuals through the challenging months ahead – and beyond.”

Despite the fact the extension has been welcomed and will be a chance for businesses to catch their breath following the worst of the pandemic and before support comes to an end, job losses are still likely to be inevitable in the autumn.

Hundreds of thousands of jobs were lost in October when the Chancellor left it too late to announce an extension to the scheme in the face of mounting new cases and an inevitable lockdown on the way.

With the extension and amendments to the scheme, the Chancellor is looking to soften what will be an inevitable blow to jobs across the country.

As the furlough scheme progresses, support will taper down, with employers being asked to contribute 10 percent towards the hours staff do not work in July and this will increase to 20 percent in August and September.

Gary Hemming told “When the furlough scheme looked to be coming to an end in October, just prior to the extension, 314,000 people were made redundant.

“At that point there were 2.4 million furloughed people in the UK, meaning 13.08 percent of furloughed workers were made redundant as the deadline loomed.

“Of course, the scheme was extended as the redundancies began, so we’ll never know the true scale of redundancies that would have otherwise happened.

“The real concern is that we now have 4.7 million people furloughed in the UK, and even a similar level of redundancies would result in another 614,760 people being made redundant in the UK.

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“Of course, the figures in November may well have ended up being worse had the scheme not been extended, which means that sadly, the figure of 614,760 predicted for September may well be far lower that the reality.”

Peter Nicholson, senior associate and solicitor specialising in employment law at Nelsons, said: “There are very few who would argue that the furlough scheme has not saved a significant number of jobs during the coronavirus pandemic. However, the big question now is how many jobs will be saved when it comes to an end in September this year.

“According to the latest government statistics, published on 25 February 2021, around 4.7 million jobs were furloughed as of 31 January this year, with an estimated 28 percent of these being ‘partial’ or ‘flexi furlough’ – where the employee is working part time or limited hours.

“The Office for Budget Responsibility (OBR) forecasts that the unemployment rate will peak at 6.5% in the fourth quarter of 2021, when the furlough scheme closes.

“However, that is an improvement on the previously forecast peak of 7.5 percent that was released in November last year.

“Realistically, while the furlough scheme has saved a considerable number of jobs so far, I expect there will be a significant number of job losses when it closes in September. It’s difficult give a definite figure as to how many redundancies there will be, as this depends on how the economy reacts as restrictions are lifted.”

The extension of the furlough scheme has been widely praised by the public and by businesses and business leaders to stop a sharp rise in unemployment.

Lee Murphy, managing director at The Accountancy Partnership said: “The decision to extend furlough to the end of September will no doubt be a welcome relief for businesses with employees.

“An abrupt end to the Coronavirus Job Retention Scheme (CJRS) could have resulted in thousands of lost jobs, so it is great to see this recognised in the Budget with a continuation of the support which has protected more than 11 million jobs so far.

“The furlough extension allows businesses to forward plan how they manage their employees for the remainder of the restrictions and beyond, without being forced into difficult redundancy decisions.

“With five months between now and August, businesses have adequate time to consider cash flow and, if all goes to plan with the gradual reopening, many businesses will be trading by then to support the businesses contributions to furloughed staff.

“It may be that even with the support available, there are still difficult decisions to make about prioritising the retention of those highly skilled workers who will most benefit the recovery of the business.

“Extending the CJRS to the end of September, beyond the planned end of restrictions in June, will give businesses the time and economic support they need to get back on their feet while the economy reopens, as this will not happen overnight.

“It is reassuring that the government is offering this support as it could be critical to many businesses’ viability during the reopening.”

Some however, have been less receptive to the support packages provided by the Chancellor.

Martin Taylor, Co-Founder Deputy CEO of Content Guru told “Keeping the job retention scheme running is risking the UK becoming a zombie economy of companies that are not viable but continue to exist on life support.

“Furlough is expensive. Some businesses are not viable but are keeping staff on for the time being as a ‘service’ to them and the country.

“However, it means that these people are not re-introduced to the job market where there are real shortages.

“What’s needed is retraining and reskilling.”


Source: Express

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Furlough warning as redundancies among over-50s increase 240%

The number of redundancies among over 50-year-olds increased by 240% last year, new figures suggest.

The total rose from 35,000 at the start of 2020 to 121,000 by the end of the year, according to an analysis by Rest Less, which offers advice to older 50s.

Redundancy rates for the over 50s have climbed from 4.2 per 1,000 employees in January to March 2020 to 14.4 in September to November, said the report.

The study added that 25-34-year-olds have been hardest hit by redundancies so far.

Stuart Lewis, founder of Rest Less, said: “With businesses suffering in the wake of the pandemic, we knew redundancies were going to be high as furlough was originally scheduled to end last October.

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“Even though redundancy rates amongst the over 50s have never been this high, our concern is that there is worse still to come with more than 640,000 over 55s still on furlough.

“The biggest challenge for the over 50s is not redundancy or furlough rates, but rather it’s what happens when talented workers in this age group move from paid employment to job seeking status.

“The recruitment process is where age discrimination bites hardest, particularly at this time when the pandemic has exacerbated existing inequalities in the workplace.”

A Government spokesman said: “Older workers are a vital asset to this country and hugely employable, which is why our Plan for Jobs is delivering tailored support to help them back into work and retrain into new industries.

“We are increasing the number of frontline work coaches by 13,500, offering bespoke support to ensure people find a job that’s right for them, helping over 50s retrain on our sector-based Work Academy Programme, and our new £2.9bn restart scheme will see people across the UK who have been out of work for at least 12 months get back on the job hunt.”

By Neil Shaw

Source: Wales Online

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UK economy facing “capital destruction” event as furlough ends

Major sectors across the UK equity market are facing a “capital destruction” event in the next few months as the real impact of coronavirus feeds through to their bottom lines, Smith & Williamson Investment Management’s Enterprise Fund team has warned.

The furlough scheme has protected a number of businesses, including many in the retail and leisure industries, which have been some of the worst impacted by the coronavirus.

However, as the scheme is wound up, many businesses will not be able to return to trade as normal. Mark Swain, co-manager of the Smith & Williamson Enterprise Fund, said the impact of this was about to be felt across several industries.

“Markets have held up relatively well in the face of coronavirus, including in the UK, but capital destruction is coming now,” he said.

“We are at the tipping point as the furlough scheme comes to an end, and unfortunately coronavirus is going to create ‘survivor’ companies and remove a lot of weaker ones.”

Swain, who manages the Enterprise fund alongside co-manager Mark Boucher, said various sectors are seeing long-running trends – both positive and negative – being accelerated by the pandemic.

“Some companies are benefiting from this and will continue to do so and some, particularly those relying on cheap and abundant leverage, no longer have viable business models,” Swain said.

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“Pandemics accelerate existing structural trends, and so this time companies with a strong internet presence are thriving, and those relying on high footfall, or those overburdened with too much debt for example, are really struggling.”

Swain said as a result of the nature of the crisis, the sectors in the eye of the storm, including retail and travel and leisure, were polarising, with winners likely to benefit from better business models and healthier balance sheets, but also a decline in competitors.

“If you look at retail, for example, a lot of capacity is coming out of that market and the better operators – those that are good at retailing and have a strong internet presence – are going to prosper.”

By contrast, the duo expect the “zombie” companies being kept afloat by the furlough scheme to face an uphill struggle for survival.

“If you are a business that is currently not open because of Covid-19 restrictions then the future looks very bleak, and there are large swathes of struggling companies across the UK that will not get through this,” he said.

By Peter Wilson

Source: IFA Magazine

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