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Next and Dixons demand furlough clarity to avoid mass layoffs

Laura Onita
·4-min read
Next shop
Next shop

The bosses of Next and Dixons Carphone have called for answers over the taxpayer-funded furlough scheme as fears grow over a huge wave of redundancies when support is withdrawn.

Lord Wolfson and Alex Baldock raised fears that thousands of jobs could be threatened by an abrupt end to the scheme, which is due to finish on June 30. There are concerns that a rapid shutdown could trigger mass lay-offs as bosses reopen with social distancing measures in place and fewer staff.

The retail chiefs raised concerns as the Treasury weighs up plans to introduce a flexible furlough scheme that would allow companies to partially bring workers back.

Employment lawyers warned that businesses could be forced to kick off massive redundancy processes within two weeks if the Government does not extend the furlough scheme beyond the end of June. 

The scheme covers 80pc of workers' salaries up to £2,500 a month and is currently paying the wages of around 4 million people.

Next chief executive Lord Wolfson praised ministers' swift response to the crisis by introducing a string of measures to support businesses, saying it had prevented economic collapse. 

But he added: “I think that the thing that we need from the Government is clarity on furlough rules as and when businesses begin to reopen partially. I don’t think we need [that information] for another three or four weeks."

Guidance is needed for what to do about staff who are vulnerable or sole carers of their children and can’t come back to work even if his shops reopen, Lord Wolfson said. About 7pc of Next’s workforce fall into those categories, or about 640 people.   

He said: “Our view is, wait and see. We don’t need to make any decisions now about staffing levels. We’ll get the shops open, see what levels of demand there are.

"It will take two or three weeks for us to get to the point where we’re sure [about staffing levels]. Once furlough finishes I think we will see more companies shedding people."

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The Tory peer's views were echoed by Dixons chief executive Alex Baldock, who has put 16,500 employees on furlough. 

He said: “We are starting to raise our gaze beyond this crisis to how things might be different. In short, we would support a tapering of government relief rather than just ending on a cliff edge."

Business leaders and officials have discussed allowing furloughed workers to go back to work with part of their salary still covered by the taxpayer, similar to schemes in Europe. 

Staff could work for a couple of days a week while still getting a subsidy.

Companies laying off more than 100 employees must carry out a 45-day consultation before firing them - a process that can take even longer if workers are not unionised and have to appoint representatives. 

To avoid having to pay returning staff from July 1, employers would need to start sackings by mid-May. 

Jon Taylor of law firm EMW said the Government must clarify whether the scheme will be extended to avoid to launch redundancy processes being launched by default. 

A Treasury spokesman said: “We will take into account the wider context of the lockdown, the public health response and the longer-term economic recovery when taking any decision on how and when to close the scheme.”

The Confederation of British Industry (CBI) has held talks with the Business Secretary about bringing people back gradually.

Dame Carolyn Fairbairn, director-general said: "Some support systems will need to stay in place. One of the most interesting next steps on the job retention scheme is how it becomes more flexible [with either] tapered furloughing or partial furloughing.”

Craig Beaumont at the Federation of Small Businesses warned a “cold stop” to the scheme at the end of June would be disastrous.

He said: “As we transition out of furlough, there is the opportunity in June to start to think about flexibility and that has landed pretty well. It is a very active discussion.

“If you try and bring 4 million people back from 0 to 100, you risk redundancies because the economy will not have recovered.”

Economists warned that millions of the jobs saved so far risk being lost if the scheme is not extended and made more flexible as the economy is rebooted at the end of the lockdown.

Garry Young, of the National Institute of Economic and Social Research think tank, said: “The furlough scheme at the moment is paying people not to work at all - the challenge will be to pay people perhaps to work sometime, or to subsidise some of their pay,” said .

“The job retention scheme will need to be adapted so that it can subsidise those businesses to stay open.”

Next has warned that its full-price sales are expected to fall by 40pc due to the lockdown, more than it previously thought. The company said it has enough access to cash to weather the storm. 

Dixons Carphone’s update was less sombre, with like-for-like sales over the last five weeks only down by 3pc. This was largely due to its shops in the Nordics, which remain open, as well as a 160pc surge in online sales as customers bought laptops and printers to work from home with.