More than three quarters of UK businesses have applied for the government’s job retention scheme, according to an official survey that laid bare the extent to which the furlough programme is supporting the economy.
The Office for National Statistics (ONS) said 76 per cent of UK firms had applied for the scheme, up from 66 per cent a fortnight ago. The centrepiece of the government’s economic support, it pays 80 per cent of “furloughed” workers’ wages up to £2,500 a month.
The survey also revealed the fragility of many UK businesses, with 44 per cent saying their cash reserves will only last six months.
Businesses were relieved when chancellor Rishi Sunak on Monday extended the furlough scheme until October at its current 80 per cent level. He said companies would have to start sharing some of the cost from August, however, and estimated it is costing the government £8bn a month.
Sunak said the scheme, which supports 7.5m workers, would aid Britain’s economic recovery. He told the House of Commons: “We stood behind Britain’s workers and businesses as we came into this crisis, and we will stand behind them as we come through the other side.”
Today’s ONS figures also showed that 22 per cent of businesses surveyed between 20 April 20 and 3 May had paused trading. Encouragingly, less than one per cent had closed for good.
However, economists have warned that there is likely to be a wave of company failures when the government eventually winds down its support.
Exacerbating their cashflow problems, 61 per cent of firms said turnover was lower since the lockdown began. A quarter said turnover had fallen by more than 50 per cent.
The outlook for companies is not bright. The Bank of England said last week that GDP could crash 25 per cent in the second quarter, driving the economy to its worst year since the 1700s.
However, it predicted a strong bounceback, with GDP growing 15 per cent in 2021. It praised the government’s support schemes, saying they should prevent long-term “scarring” of the economy.