As summarised here the Government has made available an unprecedented range of schemes and support to try and help businesses through the Covid-19 pandemic.
The scheme that appears to be attracting the most attention, and up-take from employers, is the ‘Job retention scheme’.
The key points of the scheme are as follows:
The Government will provide grants to businesses for up to £2,500 a month to cover 80% of an employee’s salary for those retained but not working.
The Government will also cover the employer’s National insurance and minimum auto-enrolment pension scheme contributions.
Initially available for three months from the 1st March 2020 but could be extended as required.
Employees must be designated as ‘furloughed worked’ for a minimum of three weeks to be eligible.
When the scheme was announced by the Chancellor, the Treasury estimated around 3m people (or 10% of the private sector workforce) would use the scheme with an estimated cost of £10bn for the initial 3-month period.
On the 2nd April, The British Chamber of Commerce released the results of its survey regarding the Job Retention scheme. This survey received responses from over 600 business, the majority being from smaller businesses (classed as less than 250 employees), between the 25th to 27th March. The key results from this survey are as follows:
In the week following the survey:
44% of respondents expect to furlough at least 50% of their workforce;
32% of respondents plan to furlough between 75% to 100% of their workforce;
26% did not plan to use the scheme.
These results, whilst only representing a very small proportion of business in the UK, appear to suggest that a far greater number than initially anticipated by the Government are expecting to use the scheme. When using the Governments estimates of the private workforce size and results of this survey, it would result in a minimum of 44% or 13.2m of employees ending up in this scheme. If this were to be the case, you would expect that the Government would need to seriously consider the length at which this scheme will be operational given the estimated cost to the taxpayer.
The survey also highlighted other concerns that respondents currently have regarding cash flow.
18% said they had less than one month’s worth of cash in reserve;
44% reported one to three months cash reserves;
Only 6% reported over 12 months of cash reserves.
These results highlight, as expected, that several businesses have significant immediate and medium-term cash flow concerns that need to be addressed.
Ensors is well placed, with our specialist Business Advisory and Corporate Finance teams, to offer advice and assistance to those businesses in need and look at the options to help them through this difficult period. Please contact us for more information.