One in five businesses threaten to axe jobs as furlough support is cut

One in five businesses threaten to axe jobs as furlough support is cut
Government subsidies slowly being made less generous as Treasury prepares to end scheme by October

Around one in five businesses have said they are likely to make staff redundant in response to the changing furlough rules, the British Chambers of Commerce (BCC) has said.

From Sunday, companies are being asked to contribute 20 per cent of their furloughed staff’s wages, up from 10 per cent in the previous month.

Of 250 businesses with employees still on furlough surveyed by the BCC, 18 per cent told the chamber they were considering axing jobs because of the changes, while a quarter said they would aim to reduce hours or move staff to part-time shifts. Almost 40 per cent said the change would have no impact on the business.

The survey was conducted between 5-23 July, with businesses who contributed having at least one staff member on furlough at the time.

The furlough scheme has seen staff whose jobs have been put on hold during the coronavirus pandemic guaranteed 80 per cent of their salaries – up to a cap – from the government.

But 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 per cent of their employees’ salaries, while government support dropped from 80 per cent to 70 per cent.

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

With a monthly limit of £2,500 on salaries supported by furlough, employers will now be expected to pay up to £625 a month per employee, compared with £312.50 during July.

Some businesses could be worse-hit by the impending job losses than others. Data released on Thursday showed that 58 per cent of jobs at UK airlines are still furloughed, while travel agencies and tour operators, the creative industries also still have many people on furlough.

There are also fears that older workers could bear the brunt since those in the 65 or over age band made up the highest proportion of staff still on furlough.

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.”

A government spokesman claimed “two million fewer people expected to become unemployed than forecast last year” but added that it was “not possible to save every job”.

The spokesperson said: ”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.”

Additional reporting by PA