'Many thousands' of redundancies predicted as furlough tapers off

1 August 2021, 00:01

One in five firms plan on letting staff go in response to Sunday's furlough policy change
One in five firms plan on letting staff go in response to Sunday's furlough policy change. Picture: Alamy

By Patrick Grafton-Green

"Many thousands" of redundancies are being predicted as furlough support tapers off this weekend.

A survey found one in five firms plan on letting staff go in response to Sunday's policy change.

Employers will now be asked to contribute 20% towards the salaries of those whose wages are currently being subsidised by the state.

READ MORE: Number of people on furlough lowest since pandemic began

READ MORE: Furlough scheme starts winding down amid warnings over UK's recovery

The furlough scheme has seen staff whose jobs have been put on hold during the coronavirus pandemic guaranteed 80% of their salaries - to a limit - from the Government.

The support is slowly being made less generous as the Treasury prepares to end the scheme by October.

In July, employers had to pick up 10% of their employees' salaries, while Government support dropped from 80% to 70%.

Starting on Sunday, this will be reduced further to 60%, with employers picking up 20% of the furlough pay in August and September.

The British Chamber of Commerce (BCC) is warning the latest reduction in furlough aid will lead to thousands of job losses and is calling on ministers to ensure those impacted can retrain.

Official data shows that 1.9 million people were still furloughed by the end of June, a reduction from 2.4 million a month earlier.

HM Revenue and Customs data released last week stated that those in the 65 or over age band made up the highest proportion of staff still on furlough, raising concerns some older workers could find it hard to source new employment, the chamber said.

Jane Gratton, head of people policy at BCC, said: "Today's changes to the furlough scheme will likely result in many thousands of people being released back into the labour market, as employers who are still struggling to recover from the recession are forced to make redundancies and cuts to working hours.

"With widespread skills shortages across the economy, some will find new jobs where their skills are in demand, while others will need to retrain for opportunities in a different sector.

"Whether furloughed workers are returning to the workplace or the wider labour market, it is crucial that employers and the Government give them the support and training they need to be re-engaged and productive.

"Alongside rapid retraining opportunities, Government should extend the Kickstart scheme into 2022, and expand it to enable older workers to gain new skills and experience."

Out of 250 businesses with employees still on furlough, 18% told the chamber they were likely to make staff redundant in response to being asked to contribute up to 20% of their furloughed staff's wages.

A quarter said they would aim to reduce hours or move staff to part-time working patterns.

In better news for the British workforce, almost 40% said the change would have no impact on the business.

The number of people on furlough has been dropping since January when 5.1 million workers were stuck at home.

But going into July, more than one in four employers still had some of their staff on furlough.

Unless these staff are made redundant or brought back to work, keeping them on furlough through the month will cost businesses millions of pounds.

The chamber's research took place between July 5 to 23, with businesses that contributed having at least one staff member on furlough at the time, a spokesman said.

A government spokesman said: "Our Plan for Jobs is working, and has supported the livelihoods of workers throughout the pandemic with two million fewer people expected to become unemployed than forecast last year.

"We deliberately went long with our support, with furlough in place all the way through to the end of September, and three million workers coming off the scheme since March.

"As the economy rebounds, it's right that furlough support is tapered, so that we can focus support elsewhere.

"We've always been clear that it's not possible to save every job, but our Plan for Jobs is helping people of all ages find the skills they need to get back into work, including thorough the Restart Scheme, the sector-based work academy programme, and our Job Entry Targeted Support scheme."