CJRS extension crucial to supporting UK businesses

CJRS extension crucial to supporting UK businesses

With nearly every other UK SME utilising the furlough scheme, the policy has become critical

CJRS extension crucial to supporting UK businesses

The Coronavirus Job Retention Scheme (CJRS) has been extended into the autumn by Chancellor Rishi Sunak, providing continued assistance to struggling UK businesses.

“The extension of the scheme is undoubtedly a huge relief for a great many business owners and their employees, as an immediate turning off of the tap would likely have been disastrous,” Phil Reynolds, restructuring advisory partner at FRP Advisory, said via email.

“Critically, it will provide the necessary flexibility for firms to bring people back to work at a pace in line with their own recovery which, for many, will be slow and gradual.”

Since its March creation, the furlough scheme has supported 7.5m workers from nearly one million UK businesses, according to HMRC. All told, £10.1bn has been claimed through CJRS since it was announced in mid-March.

CJRS will continue to provide businesses with 80 percent of employee salaries, capped at £2,500 per employee, until the end of October. After this point, businesses will need to contribute to the salaries of furloughed employees.

While some welcomed this announcement, others have been sceptical about the mounting costs of the scheme.

Research from Sage found that nearly one in two SMEs have already utilised the furlough scheme, with 70 percent having furloughed over half their staff.

“A large part of the UK private sector – and its employees – are leaning heavily on this system and it is right not to pull the rug from under their feet,” Sabby Gill, managing director of UK&I for Sage, said in a press statement. “However, first and foremost, SMEs are after flexibility.

“We are seeing a clear preference for an extension to the scheme that allows them to return employees gradually, at reduced hours or after shorter furlough periods.”

Gill noted that while employees will be able to return to part-time work from August, many SMEs will struggle to pay full-time salaries due to lower sales volumes.

CJRS is set to wind down in the autumn as employees return to work, but these changes are highly dependent on both the state of lockdown and industry.

Although over 300,000 businesses have received a collective £15bn in government-backed interruption loans, some SMEs have been unable to receive that support.

Andrew Harding, chief executive – management accounting at the Chartered Institute of Management Accountants (CIMA), said that while the expanded CJRS will be a lifeline for many, the professional body hopes the scheme adopts a sector-by-sector approach.

“While we recognise that the furlough scheme cannot go on forever in its current form, we are concerned that some sectors (e.g. hospitality, leisure and travel industries) will not be able to go back to work within the Government’s estimated timeline,” Harding said in a press statement.

The thought was echoed by Michael Izza, chief executive of ICAEW, who added that large-scale job losses would have a profound social and economic cost.

“Looking ahead, it is sensible that the scheme should incorporate greater flexibility to stay in step with the Government’s strategy for a phased national recovery,” Izza said. “Allowing companies to bring staff back into full-time working in stages will avoid a dangerous ‘cliff-edge’, but this must not create complexity and an administrative burden on business.”

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