Furlough scheme 'wind-down' likely by summer, could mean job losses

By

Sandra Halliday

Published
May 6, 2020

There are fears that fashion retail could see a wave of job losses in the summer as the UK government is reportedly preparing to wind down its Job Retention Scheme (JRS) from July.

Large numbers of staff are currently on furlough, but with expectations that physical retail will take a long time to get back to normal (if it ever does), it's likely that a percentage of those staff won't be needed by their employers after the lockdown.

Large companies that might have to make staff redundant will have to make decisions very soon as they will need to give those staff at least 45 days notice of their plans. 

At the moment, the JRS has taken the pressure off as it pays 80% of the wages of any staff who have been furloughed up to a maximum of £2,500 per month. But the government has set an end date of June 30 on it. And while it's expected to continue beyond that date, it’s likely to be less generous as the UK authorities would want to wean businesses away from it as quickly as they can once the lockdown is over.

That's no surprise given that it’s costing the state billions of pounds in subsidies. Some 6.3 million people have been temporarily laid off by 800,000 companies and claims up to May 3 added up to £8 billion.

The Guardian reported that the Treasury is looking at several options for reducing the scheme, including cutting the wage subsidy from 80% to 60%, as well as lowering the £2,500 cap. It's also mulling the option of allowing staff on furlough to do some work with a smaller subsidy.

No final decision is believed to have been made, but with Prime Minister Boris Johnson reported to be ready to announce lockdown exit plans this Sunday, it's clear that businesses will want to know what funding will remain available to them over the next few months.

That's especially so given that the UK is reported to be about to enter the deepest recession in living memory.

Chancellor Rishi Sunak this week promised that there would be no ‘cliff edge’ ending to the scheme and said he's working on the most effective way to wind it down.