Which Sectors Will Benefit If UK Brings Back Furlough Scheme?

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Which Sectors Will Benefit If UK Brings Back Furlough Scheme?

 Which Sectors Will Benefit If UK Brings Back Furlough Scheme?
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Highlights 

  • The IMF has said that programmes like the Furlough Scheme would be reintroduced by the UK if tighter restrictions hit the economy again.
  • Around 1.3 million people would benefit from the scheme at a monthly cost of £0.8 billion to £1.5 billion for the Treasury.
  • Sectors like hospitality, wholesale and retail, manufacturing, entertainment, construction, transportation, and travel are expected to benefit from the scheme.

With the fear of the new variant of coronavirus Omicron spreading rapidly across the globe, the UK government may need to restore some of the measures and schemes it adopted in the earlier phases of the pandemic. The International Monetary Fund (IMF) has said that programmes such as the Furlough Scheme would be reintroduced by the UK if tighter restrictions hit the economy again. As per IMF, schemes like furlough and targeted support to small businesses and poor households are necessary in case of another wave of infections. However, the design of the scheme should be revised based on past lessons, including things like tapering and timely sunset.

When the UK was placed under a complete lockdown in March 2020 for the first time, the furlough scheme, or the Coronavirus Job Retention Scheme, was introduced to protect employees from job losses. Around 11.7 million jobs were protected with the Furlough Scheme, making it one of the biggest interventions by Chancellor Rishi Sunak in the economy during such times.

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UK may have to bring back furlough scheme

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Why is furlough needed now?

With continuous government support and a robust vaccination drive, the UK has made a quick recovery in the last few months. However, rising inflationary pressure and capacity constraints amid the increasing fear of Omicron could dampen the UK’s growth. By the spring of 2022, inflation level, which is already above the Bank of England’s 2% target, is expected to touch 5.5%. To counter the rising inflation, an interest rate hike is expected, which will in turn impact both households and businesses.

With the first death being reported in the UK due to the Omicron variant on 14 December, the country fears a fourth national lockdown, affecting millions of people. The furlough scheme, which came to an end a few months ago, is expected to return for protecting the lives and livelihoods of people.

Which sectors would benefit?

Workers belonging to all age groups have benefited from the furlough scheme, however, more young people were on furlough as a higher proportion of young people work in the sectors that are worst hit by the pandemic. Depending on the impact on their businesses, some sectors benefited more from the Furlough Scheme than others. These include accommodation and food services, wholesale and retail, manufacturing, arts, entertainment, and recreation, construction, transportation, and storage.

With the announcement of Plan B restrictions announced on 8 December, the hospitality sector has already got an idea of what’s about to come. At the most lucrative time of the year, bookings are being cancelled for parties and other big events. With travel restrictions being imposed yet again, the travel and tourism industry is also worsening while dealing with an already high debt burden.

All these sectors of the economy need support to sustain themselves in these rough times and the furlough scheme would help workers retain their jobs even if the businesses are running in losses.

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Bottomline

According to a senior economist at the Institute for Public Policy Research (IPPR), Carsten Jung, around 1.3 million people would benefit from the Furlough Scheme at a monthly cost of £0.8 billion to £1.5 billion for the treasury. The Furlough Scheme, which has largely been a success previously, is expected to provide the necessary support to the economy in case of another lockdown.

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