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'Difficult decisions' for UK firms when furlough scheme winds down

28 May 2020

A new survey by the Institute of Directors found that a quarter of businesses using the Job Retention Scheme say they will struggle to contribute to the salaries of furloughed workers from August.

The survey was conducted between 20 and 27 May 2020, with a total of 697 company directors as respondents.

Around half of the company directors involved and using the Coronavirus Job Retention Scheme for their staff said that they could provide 20% or above towards the full-time salaries of furloughed workers between August and October. But a quarter said they could not afford any such amount.

Over a third of respondents, using the Job Retention Scheme said they would bring the majority of their furloughed workers back part-time – this being if the scheme allowed it. Less than one in ten said they would not bring anyone back part-time.

Yesterday, the latest figures were released, sharing that a total of 8.4m people have been furloughed, with over a million firms using the scheme. 

Being that businesses will be soon returning to work, the Institute of Directors called upon the Government, seeking targeted financial assistance for SMEs needed to make health and safety adaptations in the workplace. 1 in 3 business leaders who participated in the survey said that financial support for adjusting workplaces was necessary and would help get their organisation operating safely under social distancing measures. This came second only to better clarity around commuting on public transport.

The institute also called for as much flexibility in the system as possible, for the protection of jobs. The majority of those polled and who have staff on furlough said they would make use of a shorter minimum furlough period if allowed. As it stands currently, workers have to be on furlough for a minimum of three weeks, making it difficult for firms to react to uncertain demand.

Jonathan Geldart, Director General of the Institute of Directors explained how the scheme protects millions of jobs, but directors are aware that the support given by the Government cannot be infinite.

‘’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 are doing all they can to avoid such a scenario: launching new products, implementing new ways of working, innovating.

‘’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 fully capacity for the foreseeable future, and there’s no magic want to lift demand back up again.’’

Geldart explains that to soften the blow, flexibility should be introduced to the furlough system. By doing this firms can recover better and less jobs will have to rely on state subsidy.

‘’Being able to bring people back part-time will help a lot of companies but there are other changes business leaders would like to see, such as reducing the minimum furlough period.’’

As businesses struggle to create new roles in the coming months, and many potential job losses, the focus goes to the training system.

‘’Businesses are eager to work collaboratively with Government to lift skills across the board’’.

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