What is Furlough?
The term furlough refers to a temporary leave of employees due to special needs of an employer/company. This may be due to economic conditions of an employer or society and can be short or long term. The pandemic saw mass furloughing for a long period of time due to the need to shut down for safety.
Furlough with Covid
The Covid19 pandemic saw many sectors put employees on furlough with access to the government paying up to 80% of wages. This saw wages being paid for people who were unable to work, or for employers no longer able to pay staff. The monthly limit of furlough was £2,500. The government at first paid 80% of wages and then in August and September, 60% was paid by the government with 20% paid by employers. The furlough scheme, which protected millions of jobs during the pandemic, ended on the 30th of September 2021.
The BBC reported that the most recent figures showed 1.6 million people were on furlough at the end of July, this was the lowest level since the start of the pandemic and over 300,000 fewer than a month before. By the end of September, it was forecast that nearly one million workers would still be on the scheme.
There are various speculations about the level of unemployment since the ending of furlough, some employers may find it to expensive to keep on employers now the scheme has ended. Forecasters such as the Bank of England, are expecting a small rise in unemployment. If made redundant on the furlough scheme, individuals have a number of legal rights and options for financial support which can be read about here.
The Cost of Furlough
Around 11.6 million jobs were supported by the scheme. From March 2020 to the end of September 2021 (the duration of the furlough scheme), the overall cost of the scheme will reach £66bn. This is according to estimates from the Office for Budget Responsibility. This total cost is around one fifth of the government’s Covid19 expenditure.
It is also uncertain at this current point in time, the effects there will be on overall unemployment.
Sectors Most Affected by Furlough
It was always likely that furlough wouldn’t have the potential to save every job, this is especially true when considering how the pandemic changed the way we spend and the way we live. Evidence since the ending of the furlough scheme a couple of weeks ago suggests that many businesses are bringing employees back to work, either in an old job or a new role. Evidence from the BBC highlights that even though the scheme has finished, the 31 companies that took at least £1m of furlough payments last month, are not yet planning mass redundancies. It is still early days for a full analysis of furloughs success and shortcomings. It will also be interesting to see how the government deals with Covid this winter.
Even though many businesses have been negatively affected in some way or another by the pandemic, the damage across every sector has not been equal. Business success during the pandemic has relied on the risks of infection, policies to contain the spread, and the adaptability to change produce or work and operate remotely.
Firms reported that from April 2020 to March 2021 that sales were 21% lower than normal and over the past year around 70% of firms reported uncertainty facing their business was high or very high. You can read more about this here. Industries which rely on personal interactions and travel have been among the worst affected. Such sectors include hospitality, gyms, leisure and travel providers. Sales have been reportedly 50% lower in the past year due to the pandemic. Naturally, these sectors saw higher levels of furloughed staff too so could be more heavily affected by the scheme’s end.
Insights from our Team and Lenders
Like before with the educational piece on Brexit and the finance sector, which can be read about here, I contacted our team and lending panel for their professional guidance and insights into these unprecedented times surrounding the ending of the furlough team. Everyone was very eager to provide quotes and reassurance that we here in the finance sector are perfectly positioned to help out in these times.
Our very own Christopher Preston, Sales Director South West, noted that “the term “unprecedented” seems to be one which we are all getting used to …, but business owners and managers are having to get used to dealing with uncertainty and challenge; the end of the furlough scheme will once again present a challenge at a time when business leaders also have to face into increasing supply chain disruption and an evolving energy crisis. These events will undoubtedly put a strain on cashflow as well as management time and resource. The good news is that lenders are stepping up to the plate to support and we have seen an increase in activity and enquiries. As ever its best to talk to your lender or us sooner rather than later.”
Linking to the notion of unprecedented times, our contact at Grenke commented “We have seen an increase in activity since the scheme has ended but the picture will most definitely change in the coming months as businesses will feel the financial weight previously avoided by the furlough scheme. This alongside all the other government backed schemes coming to an end will put further strain on business working capital. Inevitably some businesses will be a step ahead as opportunities have been won, but not all will be this fortunate.” Armand Roux, Sales Director at Grenke.
How We Can Help
If you are in need of finance and you’re unsure of where to go from here, you can speak to one of our in-house experts. We pride ourselves on full UK coverage and over 100 year’s combined experience within the Goodman Team!
As industry leaders in Asset Based Lending and having won Invoice Finance Broker of the year, we have built a reputation for our outstanding services and a client centric approach. We can confidently conduct a full business finance review and offer one of the best, well-vetted lending panels in the UK Market.
We offer financial planning for cashflow gaps, MBO, MBI, acquisition finance, capex or property purchase. We have also have long and successful track record of supporting all sectors from construction, engineering, manufacturing, recruitment and many more! To read some of our case studies that attest to this, click here.
Our services are perfectly suited to help businesses affected by furlough ending!