UK markets open in 1 hour 7 minutes

Coronavirus: Firms warn of closures and job losses if furlough grants cut

Tom Belger
Finance and policy reporter
The empty interior of a pub which remains closed due to the coronavirus pandemic, in Marylebone, London, after the introduction of measures to bring the country out of lockdown. (PA)

The UK government’s plans to wind down furlough subsidies risks forcing firms to slash thousands of jobs and close down venues for good, business leaders have warned.

One in four respondents in an Institute of Directors (IoD) survey of its members said they could not afford to cover 20% or more of their furloughed employees’ wages.

Employers will soon have to start footing some of the bill for more than 8 million workers put on taxpayer-funded furlough leave as the crisis has crippled Britain’s economy. They will be able to remain furloughed but work part-time from July to October.

Reports suggest firms will be asked to contribute at least a fifth of staff incomes, even if they remain closed. A million employers are currently receiving wage rebates.

Hospitality and pub industry chiefs are so worried they have written to chancellor Rishi Sunak, warning of job losses and urging him to instead maintain full taxpayer subsidies until October.

Read more: UK self-employed face income ‘cliff-edge’ as support scheme runs out

Emma McClarkin, chief executive of the British Beer & Pub Association (BBPA), said it was “madness” to expect pubs to contribute even if they were still shut. Many are only likely to reopen partially if allowed to do so as hoped in July, and McClarkin and other business chiefs fear low visitor numbers threaten venues’ survival if government support dries up.

“Business leaders know that the government’s support can’t be infinite, but 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,” said Jonathan Geldart, director general of the IoD.

Firms also want to see a more flexible system. Geldart said scrapping the minimum three-week furlough period would “soften the blow.” It would allow firms to be more agile in responding to demand by bringing workers for shorter periods, amid enormous uncertainty over likely trade, as well as their finances.

UKHospitality, the BBPA and the British Institute of Innkeeping (BII) used their joint letter to Sunak to call for the date furloughed workers can return to work part-time to be brought forward from August to July, when some hospitality venues will reopen.

More than a third of those surveyed by the IoD said they would bring the majority of staff back part-time if it were allowed by the scheme. Fewer than one in 10 said they wouldn’t bring back anyone part-time.

READ MORE: 8.4 million UK workers now on furlough as scheme in the air

Geldart added: “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 full capacity for the foreseeable future, and there’s no magic wand to lift demand back up again.

He also called for more financial support for SMEs to reform their workplaces to make them safe.

The joint letter even urges the government to change its social distancing guidelines, saying it should be reduced from two metres to one metre between people.

The business chiefs say it would increase the number of pubs able to reopen safely from around a third to three quarters, and make re-opening far more commercially viable. McClarkin warned as many as two-thirds of pub jobs could be lost unless the guidelines are changed.

Kate Nicholls, CEO of UKHospitality said maintaining full furlough subsidies was “necessary for the survival of vast swathes of the hospitality sector.”

READ MORE: UK coronavirus support schemes ‘leave some workers with nothing’

She added: “To expect businesses to go from a standstill to full speed immediately will only lead to venues shutting their doors for good and see staff lose their jobs.”

A Treasury spokesperson said: “Our Coronavirus Job Retention Scheme has protected 8.4 million jobs during the outbreak — and we’ve extended it until October to help as many people as possible.

“As the economy reopens and people return to work we will ensure the scheme supports both businesses and employees in a measured way.”