The government’s lifeline furlough scheme is being wound down from this month, even though the end of Lockdown measures has been delayed, causing headaches for small firms still struggling to get back on their feet.
And it could spell problems for those who have secured loans given that HMRC are currently investigating 13,000 cases of potential fraud.
Official figures show around 3.4 million people are currently on furlough, with a total of 11.5 million jobs having been supported by the scheme over the course of the pandemic.
At the same time, figures from the Office for National Statistics show debit and credit card transactions fell by 5 per cent over the week to 17 June, while retail footfall also for the third week in a row at the end of a brief uplift that followed the relaxation of Covid restrictions.
All of which means bosses have difficult decisions to make between now and September when the scheme finally ends.
Martin Gurney, Partner at national accountancy firm Haines Watts says he has huge sympathy for business owners who are dreading the changes.
“Some business owners may feel that the end of furlough is an unavoidable cliff edge,” he said. “My first advice is always to plan and forecast. It can feel difficult to take a step back and plan carefully when you feel you’re up against it, which is why I’d urge business owners not to panic and to seek outside help if they can.
“There are several things that can be done to resolve cash flow shortages. If businesses have not already explored their ability to borrow, there is still a reasonable time frame to secure more funds. This may not be advisable for every business, but if owners believe the business will recover then it is an option.
“It is also worth thinking about suppliers as a funding source and reach arrangements around new payment terms that take the pressure off.
Peggy de Lange, VP of International Expansion at Fiverr criticised the government for failing to recognise that the delay to easing restrictions should have been coupled with an extension of furlough.
“This decision will only increase pressure on businesses that are already struggling,” she said. “After almost a year of uncertainty and financial struggle, freelancers and SMEs alike need to be assured that they will not be forgotten throughout the final phase of the pandemic.“
Extra checks could include looking at whether businesses are amassing debt that could never be repaid
And Pranav Sood, VP Small Business at GoCardless, said that while furlough “offered a lifeline” for businesses, “we cannot underestimate the disruption that these changes to furlough funding will cause to some small businesses.
“Many have only just started to open up again after months of no income and may feel the rug is being pulled from beneath their feet too soon.”
And he advised: “As the scheme winds down from now until September, and with the Government’s Help to Grow scheme underway, SMEs should start considering how technology can help them get their finances back on track and provide the necessary support to bounce back.”
But Adam Parton, Corporate and Payroll Partner at MHA said that businesses will need a comprehensive support package that covers all sectors and warned of consequences for misuse of the scheme.
“While the furlough scheme in particular should be extended, concerns remain over potentially fraudulent use of the initiative, with HMRC confirming over 13,000 cases are currently being investigated,” he said.
“There’s no easy way to prevent possible misuse of the scheme, aside from having a more rigorous policing of the businesses that are taking this support. Extra checks could include looking at whether businesses are amassing debt that could never be repaid, whether staff that should have returned to work are remaining on furlough or whether their roles are already redundant. In the coming years business owners and managers should be conscious that their decisions could come under scrutiny and be aware that bad ones may have consequences.”
Amanda Simpson, CEO of the business service provider SVC Solutions, said the advanced notice of the changes means businesses have the opportunity to think ahead about what they might need.
“It’s vital that businesses have a strong level of HR support for all of its employees,” she said. “This can assist team members in returning to the workplace, ensuring control measures are in place so that their wellbeing is at the forefront as they transition back.
“This might include looking at a flexible working policy so that team members can be slowly re-introduced back into the office. Show yourself as a leading employer acknowledging this new world of work.”
“If you do find that your business requires extra staff members then it’s important to consider your recruitment package. Gone are the days of minimum wage: candidates are looking for competitive salaries, flexible home working policies and perks such as healthcare, gym memberships and more. The pandemic has placed high importance on employee wellness and this needs to be considered when looking to grow your team.”
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