Chancellor’s extended furlough gets backing
BUSINESS leaders have given their backing to Chancellor Rishi Sunak’s decision to extended the furlough wage support initiative to millions of workers to October, as new figures show the Welsh economy is losing £79m in output per day due to the Covid-19 pandemic.
So far, some 7.5 million employees have been furloughed, with the taxpayer cost of paying 80% of their wages (up to a cap of £2,500 a month) of around £10bn. This is expected to reach £50bn by the end of July.
From August employers will be expected to contribute. The scheme was scheduled to conclude at the end of June.
It comes as the UK Powerhouse report prepared by Irwin Mitchell and the Centre for Economic and Business Research (Cebr) shows Welsh GVA (gross value added) has been reduced by 37% during the current crisis.
Prior to the pandemic GVA per day in Wales was £216.7m, but has fallen to £137.5m – a decline of £79m.
With 14% of Welsh GVA attributed to manufacturing, lockdown restrictions have seen the sector face the largest loss in GVA at £22m a day.
The report shows the impact of lockdown has been compounded by Wales having fewer “high skilled” service roles, with just 6.3% of all GVA generated in from financial and insurance activities.
Such service roles find it easiest to work remotely, and a lower concentration of such occupations implies a larger overall GVA loss.
The high concentration of manufacturing firms and a large service sector has also meant fewer parts of the workforce are able to work from home and this, coupled with falls in consumer spending has made the lockdown a difficult period for the Welsh economy.
The report says: “While home working has shielded the economy in some regions, only 3.5% in Wales had worked from home prior to the lockdown.
“This meant Wales and parts of the UK unfamiliar with home working were at a disadvantage when entering the lockdown, in terms of both the experience and preparedness for conducting business from their residence.”
The only sectors to have seen growth, is information and communication, at £300,000 and human health and social work activities up £500,000.
Unchanged are water supply, sewerage, waste management and remediation activities, as well as public administration and defence.
On the extension of the furlough scheme, director of CBI Wales Ian Price said: “The Chancellor is confronting a challenging balancing act deftly. As economic activity slowly speeds up, it’s essential that support schemes adapt in parallel.
“Extending the furlough to avoid a June cliff-edge continues the significant efforts made already and will protect millions of jobs.
“Introducing much needed flexibility is extremely welcome. It will prepare the ground for firms that are reawakening, while helping those who remain in hibernation. That’s essential as the UK economy revives step-by-step, while supporting livelihoods.
“Firms will, of course, want more detail on how they will contribute to the scheme in the future and will work with the UK Government to get this right.
“Above all, the path of the virus is unpredictable, and much change still lies ahead. The UK and Welsh governments must continue to keep a watchful eye on those industries and employees that remain at risk. All schemes will need to be kept under review to help minimise impacts on people’s livelihoods and keep businesses thriving.
“The greater the number of good businesses saved now, the easier it will be for the economy to recover.”
David Hagendyk, director of Learning and Work Institute Cymru said: “This is a welcome announcement from the Chancellor. It will reassure individuals and families and give businesses the flexibility to start bringing staff back on a parttime basis. We will need to see greater detail over the coming weeks but it shows the Chancellor has listened to the many voices calling for the furlough scheme to be continued.
“Whatever happens over the coming months we are still likely to enter a period of significantly higher unemployment in Wales. This announcement gives some much needed breathing space for the Welsh Government to ramp up support for furloughed workers to upskill or to retrain. Investing now in supporting people to improve essential skills such as literacy, numeracy and digital skills, as well as giving people the chance to retrain for different careers will pay dividends in the long run and will help to mitigate the scarring impact of unemployment.”
FSB National chairman Mike Cherry said: “Our members have been telling us loud and clear that the ability to furlough staff on a part-time basis will be central to aiding gradual recovery at a time when economic activity is still in the doldrums.
“We await further detail on the contributions that will be required of small employers after July.
“We need to ensure that those obligations are affordable for the many businesses that have had no revenue coming in for months now, but still have fixed overheads to worry about.
“Our five million-strong selfemployed community is also seeking reassurances about the measures that will be taken to avoid a cliff edge moment where income support is concerned. Many have benefited from the hugely ambitious income support scheme that was established for them – some have not – but they will all need additional help from this government over the coming months. Policymakers may have to look very closely at additional hardship funds for those that are currently falling through the gaps.”