UK Furloughing Scheme Extended Till End Of September

With the announcement of the gradual withdrawal of the lockdown in the country, it seems there is a realisation in the government that business is not going to be as usual in the country, because of which it has now decided to extend some of its stimulus schemes. The furloughing scheme that was launched at the beginning of March this year to ensure that unemployment numbers do not shoot up astronomically in the country has now been decided by the government to be extended till September this year. The scheme is being seen as a major lifeline for numerous small and medium businesses in the country who have been pushed to the brink of bankruptcy because of the pandemic. The scheme entails that businesses who are witnessing fall in their revenue levels due to the pandemic induced adverse economic conditions will be able to put their employees under the benefit of the scheme where the government would pay 80 per cent of the salary of the employees up to a maximum of £2,500 per month per employee. The scheme while ensuring that a significant number of working-class people are saved from unemployment, also insures many of the businesses to survive the pandemic onslaught. Since the time the scheme was announced several large and small businesses have availed of the benefits of the scheme, with Office of National Statistics in a report published in the last week of April estimated that nearly one- third of the working-class people in the country had been put under the benefit of the scheme by their employers.

Only last week the Treasury has expressed its concerns regarding the withdrawal of the scheme. The Treasury had made a point that if the scheme is withdrawn, it could lead to a very disastrous situation that the government had been trying to avoid in the first place. The Treasury in its wisdom had tried to visualise the situation when it has to abruptly withdraw the job retention scheme and how badly or positively it might impact the businesses in the country who have been availing of its benefits for some time now. The furloughing scheme which till now has touched the lives of nearly 3.6 million working-class British people who have been put under the benefit of this scheme, has the potential to deliver a massive jolt to the economy if withdrawn suddenly. It would be highly disruptive for many of the businesses who are just recovering out of the pandemic lockdown situation and suddenly being asked to shell out a large employee paycheque may bring dooms to them. Commenting on the issue the Chancellor of the Exchequer Rishi Sunak had said that he would ensure everyone that there will be no sudden withdrawal of the programme and there will be a steady drawdown, while also reiterating that the cost of the programme to the government is huge and that it would not be possible to sustain it for long. It seems now that the government has taken a stand for the employees here and extend its support for three more months than earlier envisaged. The furloughing scheme when it was rolled out, was intended to persuade businesses not to lay off their staff and drawback their businesses. It was rolled out by the government to coincide with the lockdown, and in the last week of March when the government had decided to extend the scheme by three weeks, the Treasury, also extended the scheme by the same timeframe, the latest announcement, however, confirms that the government will extend the scheme beyond the lockdown period.

There are several challenges the Treasury will face while withdrawing the furloughing scheme. First, all industries are not equally affected by the pandemic, as there will be some industries which will be able to bounce back fairly quickly compared to other industries. It will be critical that the government keeps this in mind, it will be highly damaging if all industries are seen in one eye in this regard. The best examples are that of the pharmaceutical industry and the hospitality industry. The pharmaceutical industry has been functioning well even during the pandemic and had been supplying various lifesaving drugs and equipment to the health officials dealing with the pandemic. On the other hand, the hospitality industry is in doldrums, the industry where implementing social distancing measures will be a very difficult task to accomplish and would perhaps be the last where the business activity will be allowed. Given these circumstances, it would be improper to see the people working in both these industries with the same viewpoint. While the job retention scheme should not be elongated for the pharmaceutical industry beyond a certain point, withdrawing the scheme for the hospitality sector could be suicidal for the industry and would lead to several of its constituent businesses going bankrupt. Another possible problem may also arise, which has a high probability of being a murkier problem for the exchequer. There would be several companies who have already put their employees under the benefit of the furloughing scheme and are not able to make it through the pandemic and would go bankrupt. The government cannot withdraw its support for those employees abruptly and would have to make alternative arrangements for them other than continue giving them salaries, perhaps the government may have to even find alternative employment sources for these employees and get them suitably placed.

The country is already reeling under a massive unemployment situation because of the pandemic. There are presently more than two million people who have applied to the government for unemployment benefits and the Office of National Statistics further estimates that the unemployment rate in the country could go even higher to up to ten per cent of the workforce. Under these circumstances, the government cannot afford to take any steps which would only lead to a worsening of the situation. The current extension to the furloughing scheme announced by the government will give the much-needed breathing space to the businesses in the country to garner enough strength to stand for themselves when the furloughing scheme is withdrawn. Even so, the government would need to do a lot of handholding to industries which have been particularly affected by the pandemic to get back to be operating at sustainable levels.

Meanwhile, the situation regarding the pandemic remains worrisome in the country with no clarity emerging when the pandemic could be brought under control. The United Kingdom now has become the fourth most impacted country by the pandemic after United States of America, Spain, and Russia. The government has recently announced a three-phased lockdown withdrawal scheme. Where it has put the hospitality industry at the end to be allowed to open, under such circumstances extending the scheme to this industry and other industries which are similarly placed is warranted.