Business Monitor

Furlough: good or bad? W

hen in the future there is a need for a new Chancellor of the Exchequer, I suggest you ask me last.

The current chancellor, Rishi Sunak, was recommended by his

Treasury experts to introduce the furlough scheme and he went ahead at speed. Not me; I’d have seen the financial downside and canned the deal. Which would have been a disaster because the furlough scheme has succeeded beyond expectation. What’s more some big players – William Hill, Games Workshop, Asos and Barratt Developments have paid the money back without having their arms twisted. Again, if the decision had been left to me, I would have been all in favour of rolling over furlough. The government instead says we are on our own. I grant that it is senseless to go on subsidising businesses just because we’ve already done it. Far better to subsidise apprenticeships and other training schemes.

If your memory is dodgy like mine you will need reminding that when furlough was first introduced it was hoped that it would be a short-term scheme and that the economy would bounce back – some hope. Instead the government now needs to approach the economy as if furlough has done its job and it is time to implement a programme that addresses the post lockdown world’s needs. That means something that benefits sectors like retail and hospitality. I.e. everything needing face to face contact. What about us salesmen I can hear you call. Yup. You too.

A little reminder

As a reminder you could claim for 80% of your employee’s wages plus any employer National Insurance and pension contributions, if you put them on furlough or flexible furlough because of coronavirus. This drops to 60% in October. As far as I can tell nobody has been cheating. I suspect that part of the reason is that they could expect a whacking or their business being black-balled if they do – us Brits don’t like it when someone knowingly lets the side down.

If you or anyone you know says that we should have furlough 365, I suggest that the party involved goes to live in North Korea, where they have just that with such desirable results. Furlough demands that we are grown up. We have to recognise that the nation has suffered. If you don’t know someone who has been made redundant (quite apart from losing a family member or close friend), you are lucky. In planning this article, I heard about contacts whose employers had cut their headcount by 40% and 50%. It’s a lot however you look at it. The self-employed have found themselves in much the same hole.

The recession which has now been officially recognised and unemployment is as bad as during the financial crisis a decade ago. Unemployment has hit some big names – Virgin Atlantic being the latest at point of writing. And it won’t be the last. I would not care to have investments in Hammerson the owners of major shopping malls, as a case in point. Don’t be surprised if the Trafford Centre, among others, closes.

Hitting hard

As ever when unemployment kicks in it hits hard across most market sectors. A look at a list of the victims confirms that happening now. Some are already well known – airlines, retail, cruising and hotels. This isn’t Joe Soap round the corner but the likes of Carnival and Inter Continental.

9.6 million people have been benefiting from furlough (although | 20 | October 2020

The Coronavirus Job Retention Scheme is due to come to an end on Saturday, October 31. For some this could mean a return to full time work, for others it could mean redundancy after eight months of limbo. Here Paul Clapham, marketing expert, explores the pros and cons of furlough.

this, like all employment stats, is a moving target) at a cost of £34.7bn. I was amazed to discover that there is an official group of some 380,000 people who aren’t working and have stopped looking, which they have to be to withdraw unemployment benefit. They are called ‘inactive’; no s***, Sherlock? It is expected that unemployment will reach 7.5% this year and I have seen both 9.5% and 11% quoted for next year. No surprise at the uncertainty and I assure you I have summarised my source, which was probably summarised itself. The process of applying is, to put it mildly, complex. However, I suppose it is desirable that getting money from the Treasury is complex, otherwise scammers would be flooding Whitehall. I would strongly advise getting all your paperwork lined up or the process will be delayed.

Shafts of sunlight

Amidst the gloom there are shafts of sunlight. First people are bleating about unemployment but conveniently forgetting that we had a rate of 3.9% at the start of the crisis – nobody guessed that 10 years ago.

Next comes a fact that makes Brexiteers plain angry. When unemployment rises migrants, especially from Eastern Europe, go home. Rather proving as they have always said that they come here to work, not draw benefits. Finally, vacancies are rising. It’s not consistent. Some of the new jobs exist because employers need extra people to fulfil the demands of COVID-19. It would be nice to think that we will cope without major unemployment – America has already seen 15% and the rest of Europe has rising rates. There are calls for the furlough scheme to be extended, as is the case in Germany. However, Rishi Sunak has argued that it is unhealthy for people to remain away from the jobs market for long periods, and that it is better for them to find work in parts of the economy that are coping better with the new normal of physical distancing.

Whatever your views are on the furlough scheme, for many it has been a lifeline during the tumultuous lockdown period of 2020.

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