Staffordshire business leaders say phasing out financial support will cause many casualties

From today employers will have to contribute 10% to furloughed staff wages

Author: Adam SmithPublished 1st Jul 2021
Last updated 1st Jul 2021

Business leaders in Staffordshire are calling for the government to delay taking away financial help that's been a lifeline during the pandemic.

Changes to the furlough scheme could be 'make or break' for businesses in the Midlands and North West.

From today (July 1) employers will be asked to contribute 10% of furlough pay to employees who are still on the scheme.

That will increase to 20% on August 1 before the scheme finally winds down at the end of September.

It's feared this could spell disaster for many businesses still struggling since the end of lockdown restrictions were postponed to July 19.

As of June 3, there were 962, 600 people still on the furlough scheme.

Karen Wooley is the regional manager for Staffordshire and the West Midlands at the Federation of Small Businesses.

"So even though the staff can still continue on furlough until September, if the business finds that necessary, it's a massive contribution and massive, massive jump for employers to actually start to make that that contribution." said Karen.

"Now, last September, we saw this as well. When we were about to sort of end the furlough scheme, we saw a massive number of redundancies at that point. But actually, earlier than that, in the year, when employers were asked to start to make contributions that also put pressure on the businesses, and we did see some some sort of commercial casualties at that point as well.

"We know that our small businesses are the lifeblood of the local economy - so that needs to be matched with a similar sort of response relate. Okay, we appreciate that there isn't a bottomless pit of money here, but while we have to have these restrictions in place, there are measures that can be done quite straightforward, and relatively easily, for example, extending some of the issues that are going to change on the first of July, just for that extra couple of weeks to give that extra push and bit of help."

When an employer contribution was introduced in September 2020 there was a large fall in the number of people furloughed and an increase in redundancies.

However, taking people off furlough and making them redundant is not necessarily the best option for employers.

Redundancies bring with it their own financial burden as neither redundancy payments nor notice periods are covered by the furlough scheme.

Karen continued:

"We remember well the time last year that literally at the 11th hour before furlough was due to end, the government made the announcement they would extend it. Now by that time, we'd already seen some casualties, where people had had actually had to make redundancies.

"The other thing we need to remember is that we've talked about furlough, we've talked about business rates, we've talked about bounce back loans, but there are a couple of other whammies coming on the 1st July as well.

"One of those is the the VAT deferral will end. And the other situation is that for businesses that are involved in the import export industry of any description, the six months support that was put in place to get us through that transition period will also ended on the 30th June. So we've got a lot for the businesses to contend with when they open their eyes on the 1st July.

"The government need to act, they need to act now. And they need to act appropriately in line with the restrictions that they're placing these businesses under."

Hear all the latest news from across the UK on the hour, every hour, on Greatest Hits Radio on DAB, smartspeaker, at greatesthitsradio.co.uk, and on the Rayo app.