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Sunak holds firm as furlough winds down amid warning


Some firms may not survive the end of furlough

Chancellor Rishi Sunak is showing no sign of succumbing to pressure for the furlough scheme to be continued, despite warnings of rising redundancies.

From today 450,000 employers have to pay 10% of their furloughed workers’ pay and from August this rises to 20%, continuing through September before the scheme is withdrawn.

The Institute for Fiscal Studies, which is forecasting a surge in job losses over the summer, said it will cost businesses £322 this month, rising to £489 in August and September, to retain an employee earning £20,000 a year.

Labour says the payments amount to a combined £225 million bill for British business just as it is getting back on its feet.

Liberal Democrat Treasury spokesperson Christine Jardine warned: “How are businesses supposed to have confidence in a Government that promised to do whatever it takes, but is withdrawing support too soon? Now thousands of businesses are being left facing reduced support while still unable to operate fully to pay their bills.

“This gap before the next possible lifting of restrictions could be crucial for many of them.

“Bounce back loans are creating an extra burden and the Government needs to come up with a way of making that easier to repay.”

The Federation of Small Business pointed to new figures from HMRC showing that close to one in three employers will be hit by changes to the furlough scheme from today, the same moment at which repayments of deferred VAT start to fall due and business rates exemptions for hardest-hit firms are lost.

Between 1.3m and 1.9m people are still on furlough, according to the Office for National Statistics, though the number is falling sharply. One million people were no longer supported by the scheme last month.

Despite the warnings, some firms say they are delighted to have staff properly employed and report that employees are glad to be back at work.

Mr Sunak said: “Our Plan for Jobs has supported people’s jobs and livelihoods throughout the pandemic and it’s fantastic to see so many people coming off furlough and into their workplaces with our restaurants, pubs and shops reopened.

“These figures show what we always hoped would happen – that the scheme is naturally winding down as the economy reopens, but continuing to support those businesses and employees that need our help.”

Wrongful trading law resumes

Separately, an insolvency specialist today warned company directors that wrongful trading laws came back into force today following a Covid-19 hiatus.

David Ellis of law firm Higgs urged directors to conduct a thorough review into whether or not their business is still viable.

The wrongful trading laws expose directors to personal liability if they should have realised that insolvent liquidation was inevitable but failed to take actions to protect their creditors.

The Government suspended the laws during the initial stages of the pandemic when it was impossible in most industries to make any meaningful predictions regarding solvency for business. 

Spare parts obligation

From today, electrical and white goods will be cheaper to run and last longer, as new rules mean manufacturers are now legally obliged to make spare parts.

This right to repair is expected to tackle the UK’s ‘premature obsolescence’ problem, which sees 1.5 million tonnes of electrical waste generated every year.

Late payments reform implemented

Reforms to the Prompt Payment Code covering small businesses come into force today requiring payment times to be cut from 60 days to 30 days.

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