UK economic crisis: 11 MILLION workers could be furloughed as 6% of firms run out of cash
New figures show more than one-in-three UK firms now plans to send at least three-quarters of their staff home as the true economic impact of the pandemic becomes clear, with six percent of businesses already facing bankruptcy as a result of the shutdown. The Government’s plan to cover 80 percent of the salary of laid-off workers could cost up to £40 billion in three months as more companies decide to take up the scheme, according tothe Resolution Foundation think tank.
It is likely to cost as much as £30 billion to £40 billion over three months
The figures are based on new data from the British Chambers of Commerce (BCC) which show more businesses than first thought would furlough staff.
Resolution Foundation chief executive Torsten Bell said: “The cost of the scheme depends on firms’ take-up and the length of time workers need to be furloughed.
“But with recent surveys implying that at least a third of the private sector workforce could be paid through the scheme, it is likely to cost as much as £30 billion to £40 billion over three months.”
But Mr Bell said the despite the eyewatering figures, the social cost of millions of people losing their jobs in the absence of Government support would be “far, far greater”.
He warned workers would face “catastrophic hits to their living standards” without Chancellor Rishi Sunak’s “bold and ambitious” furlough scheme.
One fifth of companies who responded to the BCC survey are now planning to furlough all their staff, up from 17 percent in the last poll.
A total of 37 percent of respondents said they will furlough between 75 percent and 100 percent of their workforce in the coming week.
Mr Sunak said: “We have not put out a specific projection or an estimate of the take-up of that scheme.
“We did that so that people were not laid off, they were not unemployed, they had a good income to get them through this, and they remain attached to their company and their employer.
“If it ends up being significantly used I will view that as a success if it means that we get through this and then can bounce back quickly.”
The survey also found that only a small fraction of businesses have been able to get hold of emergency loans to keep ticking over, despite promises that money would start flowing quickly.
Just 1 percent of firms have successfully accessed the Government’s Coronavirus Business Interruption Loan Scheme (CIBLS), which was announced by the Chancellor last month, according to the data.
The results found that 8 percent of the companies that responded had been unsuccessful in their applications.
Firms said that a complex application process and slow replies had held them back.
Businesses have been given access to the Government-backed loans to help them through the coronavirus outbreak.
Meanwhile, smaller companies can apply for grants of up to £25,000, depending on their size.
According to the survey, 7 percent of respondents are receiving grants but 14 percent had been unsuccessful in trying to get grants. Of these, 83 percent said they had not met the criteria while 14 percent said the response from authorities was too slow, or did not come at all.
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BCC director general Dr Adam Marshall said: “Our latest data shows that many businesses face a cliff-edge scenario, either at the end of this month or over the course of the next quarter.
“We’ve seen a big jump in the number of firms furloughing staff, and many are now starting to apply for access to Government loan and grant schemes to keep themselves afloat.
“Yet our research suggests that support is only starting to reach firms on the ground.”
Six per cent of more than 1,000 respondents to the survey, which was performed last week, said they have already run out of cash.
Meanwhile, 57 percent of companies said they have cash to last three months or less.
Most of the respondents, 77 percent are in the service sector with 23 percent in the manufacturing sector.
Just under half are small businesses with between one and nine employees.
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