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Setback for Sunak

Quarter of firms ‘will struggle’ with furlough pay

Malcolm Cannon

Malcolm Cannon: ‘when the support ends in August, jobs will be lost’

A quarter of businesses using the Job Retention Scheme say they will struggle to contribute to furloughed workers’ salaries from August.

The findings will be a cause for concern at the Treasury as Chancellor Rishi Sunak prepares to unveil a timetable for asking companies to pay at least a fifth of a workers’ salary and make national insurance payments.

A survey of almost 700 company directors by the Institute of Directors revealed found that about half of those using the Job Retention Scheme for their staff said they could meet this target. However, a quarter said they could not afford any amount.

More than a third said they would bring the majority of their furloughed workers back part-time, if the scheme allowed it. Less than one in ten said they wouldn’t bring anyone back part-time.

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To protect jobs, the institute called for as much flexibility as possible in the system, with the majority of those polled who had staff on furlough saying they would make use of shorter minimum furlough periods if allowed.

Currently, workers must be on furlough for at least three weeks, making it difficult for firms to react to uncertain demand.

As businesses return to work the Institute of Directors called on the Government to provide targeted financial assistance for SMEs needing to make health and safety adaptations to their workplaces.

Around one in three business leaders polled said financial support for adjusting workplaces would help get their organisation operating safely under social distancing, second only to better clarity around commuting on public transport.

The polling was conducted between 20-27 May, and received 697 responses.

Malcolm Cannon, National Director of IoD Scotland said:  “The furlough scheme has been a lifeline for hundreds of businesses and workers across Scotland, but our members have made it clear that when the support ends in August, jobs will be lost. 

“Just as when the extension to furlough was announced earlier this month, clarity will be needed for devolved Governments to ensure businesses in their region do not lose out on support, given the disparities between lockdown end dates.” 

Jonathan Geldart, Director General of the Institute of Directors, said: “The furlough scheme is protecting millions of jobs. 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.

“Directors will be fighting tooth and nail to avoid this scenario. Companies are innovating, creating new ways of working, and launching new products.

“There is hope that as more areas of the economy return to work, more companies can keep people on board.

The Government must soften the blow by introducing as much flexibility as possible into the furlough system

– Jonathan Geldart, IoD

“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.

“The Government must soften the blow by introducing as much flexibility as possible into the furlough system. The more flexible the scheme is, the better firms can recover, and the fewer jobs will 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.

“With the prospect of job losses, and businesses struggling to create new roles in the months ahead, the spotlight will be on our training system. Businesses are eager to work collaboratively with government to lift skills across the board.”

Confidence hit

A survey of Scottish businesses by Scotianomics has revealed the full impact of the coronavirus lockdown – with confidence so badly damaged that 61% fear they will go bust despite government support.  

More than 400 companies, working across 17 sectors, took part in the survey, with 93% stating they had been adversely affected by the pandemic, including 64% saying they had been forced to stop trading. 

Two thirds (67%) admitted they could not survive without some combination of the Government’s Job Retention Scheme, which pays 80% of salaries for furloughed staff, and Holyrood’s Business Support Fund grants of £10,000 or £25,000. In total, 71% of respondents said they had not received grant payments. 

Gordon MacIntyre-Kemp, director of Scotianomics, said the survey results made grim reading and called on the government to offer more help with challenges facing businesses, such as late payments and encouraging wider uptake of invoice factoring.

“Nothing wrecks business confidence as thoroughly as seeing the payment process shattered throughout the entire supply chain.

“Without cash flow, businesses simply cannot operate. Without business confidence in the invoice chain, the economy will take an age to recover and investment will stall,” he said.

“As a nation, we should be thinking big. This kind of progressive move would inject cash into businesses exactly where it is most needed, while telling the world that the Scottish economy is up and running again.” 

The invoice factoring recommendation is one of six made by Scotianomics.

Among its other suggestions is that future help should be prioritised for the worst hit Scottish sectors, including agriculture, forestry and fishing; tourism; and arts, entertainment and recreation. 

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