Millions of workers in the country have been relying on the government’s Job Retention Scheme, which allows employers to furlough staff (keep them on the payroll without them working) during the COVID-19 lockdown.
With entire sectors of the economy closed during lockdown restrictions, the aim was to prevent a sharp rise in unemployment as businesses struggle with a sudden drop in earnings and demand.
The government’s Coronavirus Job Retention Scheme allows employees who are not able to or not needed to work due to coronavirus to claim 80% of their normal wage, up to a maximum of £2,500 per month, while they wait for lockdown restrictions to be relaxed.
However, the scheme is due to expire at the end of June, after it was announced by the Chancellor Rishi Sunak on March 20.
Figures released by Her Majesty’s Revenue and Customs (HMRC) showed that a total of 6.3m jobs have been temporarily laid off by 800,000 companies so far.
The chancellor is also said to be considering cutting back the wage subsidy from 80 percent to 60 percent, according to the Evening Standard, as part of a plan to wind the scheme down.
Although Sunak has promised the scheme will not end abruptly and there will be no “cliff edge”, the latest news has left some small and medium-sized businesses fearing the worst.
Among them is independent watch retailer the Camden Watch Company, set up by husband and wife Jerome Robert and Anneke Short, which has three branches in London employing a total of eight people.
Anneke says that if the Job Retention Scheme ends in June, the impact on her business will be “huge” and would leave them with “no choice but to make redundancies”.
Thousands have already been made redundant by companies including British Airways, Virgin Atlantic and Debenhams over the past week and over six million employees have been furloughed.
Anneke said: “Just from a human point of view, that (making redundancies) would be heartbreaking. We love our team, we’ve been working with them for a long time now, we really don’t want to have to let anyone go, and put them in a position they won’t be able to know how their finances are looking.”
She said that due to the pandemic she had had to furlough all of her staff.
“It’s a family run business which we set up five years ago. Before the pandemic everything was on track and going well”, said Anneke.
Alongside her husband, Anneke says she had worked very hard to set up the company, devoid of external funding and had to take a lot of risks to build it to what it is today.
She said: “What’s happened since the lockdown is unbelievable.
“I completely understand why it’s happened, we actually closed our stores before the lockdown because there was just no point in us being open and we couldn’t tell our staff ‘sorry you have to keep on coming in every day, keep on taking public transport every day in London, even though you’re going to end up being in a shop where nobody is going to be in our stores’.
“We’re very lucky in that our landlords have been very understanding, some have reduced rent, some have completely stopped rents for the time being, others haven’t been able to do anything because of their financial situation, but that was very lucky as it cut down our outgoings straight away
“We’ve had to dip into savings and rely on support from the government as well, we have an online store to make sure everything is ticking over.”
Anneke said that it is during the summer months that the company notices an increase in footfall at its stores.
She hopes the Job Retention Scheme is winded down gradually rather than abruptly, but would still have to have a discussion with her staff about the government not being able to guarantee 80% of their wages but instead a lower amount, as has been suggested the government might do.
She said: “We wouldn’t be able to top up our employees’ wages up because of the financial situation.”
It comes as the Bank of England warned that the U.K. economy could suffer its worst performance in 300 years due to the impact of the COVID-19 pandemic, which could see the economy shrink by 14 percent this year.
Anneke said: “Our business could end up shutting down and that’s something we’ve thought about and want to avoid that as much as possible.
“We’ve got a young boy ourselves and a second on the way, so it will be a very difficult time for us and that is a very scary prospect. Of course, the furlough scheme cannot go on forever, but the government needs to give us more information.”
Her fears were echoed by Simon Emeny, chief executive of Fuller’s Griffin Brewery which operates 380 pubs, inns, and hotels in England and currently has 4,650 people on the Job Retention Scheme.
Simon said: “For the pubs and restaurant sector who have been closed down by the government around coronavirus, the Job Retention Scheme has been a vital way of us not escalating the unemployment problem that the country could have.
“We’ve been able to place the vast majority of our outlet staff on the Job Retention Scheme whilst we await the opportunity to reopen.
“I think if the government is going to continue to keep our sector closed or make us open with extreme social distancing measures, they must do it hand in hand with an extension of the Job Retention Scheme.”
Simon says he hopes the government’s Job Retention Scheme and the decision to bring it to an end would be looked at on a sector by sector basis, especially if pubs were going to be one of the last to reopen.
It has been heavily hinted that the hospitality industry, including pubs and restaurants, will be one of the last sectors to open.
Simon said: “Clearly what the chancellor’s got to decide is whether you want to significantly hike up the unemployment rate or whether he wants to keep people on the payroll until sectors reopen.
“If he wasn’t to extend the Job Retention Scheme the unemployment rate in this country will go up enormously and we won’t have a hospitality sector to restart the economy.
“I think one has to bear in mind that the pub and restaurant sector is an enormous contributor to HMRC revenues, and if companies don’t get continued support through the Job Retention Scheme they will have to lay off hundreds of thousands of workers.”
And with the rumors that the furlough scheme will be tapered down from 80 percent, it is expected that pressures on businesses will increase even further.
Simon said: “Having spent a lot of time developing people and training people, we would rather like to keep colleagues on the payroll until we reopen, clearly that’s very dependent on Job Retention Scheme.
“Our wish would be the government extends the Job Retention Scheme and they maintain the percentage until we reopen. Clearly, if the percentage is lower then the threat of us making redundancies increases, but it’s not something that we wish to do.”
