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Furlough extension will help UK SMEs get through the next few months

12 May 2020

The Government has announced the extension of its furlough scheme until the end of October to support the 47% of UK businesses who are using it to combat COVID-19.

In-line with the wishes of a third of UK SMEs, the scheme will continue with as much support as is currently available – the single most important measure to help them get through the next few months. 

This is according to Sage’s SME Tracker, which highlights the latest weekly sentiment from businesses across the UK.
 
Sabby Gill, Managing Director of UK&I, Sage PLC said: “The JRS has been a highly effective form of support for the SME community and we welcome this extension of the scheme, which should provide vital ‘breathing room’ for businesses across the country. Sage will continue to be there to help SMEs apply for the current JRS claims and will ensure we have a solution to support them no matter what the changing JRS requirements are in the future.
 
“Over a third of SMEs have told us that the extension of the furlough scheme will be the single most important measure to help them get through the next few months, and almost half are already making use of it to pay their people. 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.
 
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. Whilst the adjustment addresses that from August onwards, we expect many SMEs that are resuming a level of operations will be looking to bring back workers part time before August. 44% still expect their business to make less than 50% its normal level of sales in spite of the new government guidance on getting back to work. Therefore, some may struggle to pay full time salaries as we enter the next phase.
 
“The focus therefore must now turn to how we can stimulate demand enough to enable SMEs to pick up the baton again. Unfortunately, the lifting of lockdown doesn’t offer a light at the end of the tunnel for small businesses. 44% say that even after the implementation of the government’s new guidelines they expect to be making less than half their normal level of sales, reflecting widespread concern about the longer-term demand picture and a real need for sustained and carefully tailored further support.”
 
Data on SME sentiment from Sage PLC: 
 
• 62% of SMEs are using, or planning to use, the Job Retention Scheme
• 47%, or 1 in 2, are already using it
• Of those using the scheme, 70% have furloughed more than half their staff
• 34% believe the extension of the furlough scheme will be the most important measure to help them get through the next few months
• When asked earlier this week what they’d like to happen to the scheme after June, participating SMEs said:
o 36% would like the scheme to continue with as much as support as is available now
o 46% would like a more flexible form to continue (23% with reduced hours and reduced top-up payments, 23% with shorter furlough periods)
o 19% would be happy to end the Scheme and rely on other forms of support
 
Sample base = 500 SMEs, survey conducted 10-11 May

Stephen Phipson, Make UK Chief Executive, said: “I applaud this announcement which avoids a looming cliff edge triggering significant redundancies for many companies and recognises the need for greater flexibility as the economy fires up. Government has been very supportive of business since the start of the crisis and it's encouraging that it stands ready to stand behind industry to protect jobs and key skills over the Summer and Autumn. Along with other business groups, we have called for these enhancements to the scheme and are very pleased the Chancellor has responded so positively.

“There is no silver bullet to any of this and both Government and industry are going to have to be adaptive, creative and flexible through what is likely to be a bumpy and turbulent flight into the future from now on. This is going to require a range of policies starting with today's extension of the Job Retention Scheme, followed by a three-stage plan to get the economy up to full speed by later in the year.

“We will continue to work in partnership with the Chancellor as we navigate these unprecedented challenges.”


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