Wednesday 5 August 2020 9:50 am

Furlough schemes are failing to save UK businesses, body warns

Chancellor Rishi Sunak’s bumper spending plan to save British jobs has failed to help companies avoid an unemployment crunch as furlough support ends, businesses have warned.

More than half of UK businesses surveyed by the British Chambers of Commerce (BCC) said their cashflow had fallen in June, while 42 per cent also said sales had worsened.

A little more than two-fifths of firms said they intend to take advantage of Sunak’s furlough bonus proposal, which encourages businesses to avoid job cuts in exchange for a £1,000 bonus per staff member still employed in January next year.

Read more: UK firms cut a total of 100,000 jobs amid coronavirus pandemic

Instead, almost a third of businesses expect to decrease the size of their workforce in the next three months.

The BCC urged Sunak to rethink the job support schemes announced in the Summer Statement, saying they were not enough to keep companies in business.

“Expected usage of schemes announced in the Summer Statement is relatively low, indicating they do not provide the right kind of support for many businesses at this critical time and a rethink is needed,” said BCC co-executive director Claire Walker.

“With confidence and demand not returning at the scale firms need, the government must take radical steps to slash the tax burden around employment to help companies pay valued staff.”

Read more: UK unemployment to hit 10 per cent as furlough scheme ends, says report

Sunak’s furlough bonus scheme is set to cost the government up to £9.4bn, as the government tries to transition companies away from furloughing staff and back into full-time salaries.

The BCC suggested a range of alternative measures, including an increase to the threshold for National Insurance contributions from £8,788 to £12,500 — a tactic it said could save businesses around £500 per job.

“A major boost to the Employment Allowance, and an increase in the threshold for employers’ National Insurance contributions are needed now if he wants to help viable companies save jobs as the furlough scheme comes to an end,” Walker added.