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Tue, 29 September 2020

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Businesses warn Rishi Sunak his post-furlough rescue plan will not be enough to prevent jobs crisis amid low take-up

Businesses warn Rishi Sunak his post-furlough rescue plan will not be enough to prevent jobs crisis amid low take-up

Chancellor Rishi Sunak has promised to do ‘whatever it takes’ to shore up the economy. (PA)

3 min read

The multibillion-pound rescue package for the British economy unveiled by Chancellor Rishi Sunak last month is not enough to stave off an unemployment crisis, a leading business group has warned.

The British Chambers of Commerce (BCC) said a host of new schemes unveiled at the Summer Economic Statement are suffering from low take-up.

And they cautioned that the looming end of the Government’s furlough scheme — which sees the state pay the wages of millions of employees — in October will increase the risk of job losses in the UK.

The group’s latest coronavirus business tracker finds that more than half of UK firms reported a cashflow decrease since June 2020 — with more than a third of respondents who have an improved cashflow situation citing cash from the furlough scheme. 

Almost a third of firms (29%) expect to cut the size of their workforce in the next three months, the BCC found.

While 43% of firms intend to use the new Furlough Bonus, which will see companies rewarded with £1,000 for retaining staff they would otherwise have made redundant, other schemes outlined in the Chancellor’s Summer Economic Update fare less well.

More than half (56%) of businesses said they did not intend to use the Government’s Kickstart scheme, a £2bn programme aimed at creating six-month work placements for those aged 16-24.

Thirty-one percent of the companies surveyed said they had not heard of the Kickstart programme, while 8% said they would like to take part in it but are not eligible.

Meanwhile almost two-thirds (62%) of firms said they did not intend to use new government grants for employers who take on trainees, while 65% said they did not intend to access grants for those who hire apprentices.

The business group is calling on the government to “reduce the overall cost burden on firms to protect business and preserve as many jobs as possible in the coming months”.

They want the Treasury to commit to an 1-month expansion of the Employment Allowance, which reduces National Insurance liabilities, from £4,000 to £20,000, and an increase in the threshold at which firms have to start making NI contributions from £8,788 to £12,500.

The BCC claims that such a move could save firms “around £500 per job”.

Launching the latest survey, the BCC’s co-executive director Claire Walker said: “Business communities continue to face significant operational challenges, with a prolonged period of reduced sales and cashflow meaning many firms are showing signs of distress.

“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.”

She added: “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. 

“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.”

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