Retail to be dealt “devastating blow” as furlough tapers off – industry groups

Experts respond to the news that 1 in 5 businesses could make staff redundant as furlough support changes across the UK.
"We need to see thegGovernment backing small businesses and supercharging the employment environment" - Mike Cherr

Leading retail groups and the major union for retail workers have all said the tapering of the furlough scheme will have a serious impact on the sector.

Over the weekend, the British Chambers of Commerce revealed that approximately one in five businesses have said they were likely to make staff redundant as furlough support changes across the UK.

From this month, employers are now being asked to contribute 20 per cent of their furloughed staff wages, an increase of 10 per cent from last month.

In a survey by the BCC, out of 250 business with employees still on furlough, 18 per cent told the chamber they were likely to make staff redundant in response to being asked to contribute up to 20 per cent of their furloughed staff’s wages, while a quarter said they would aim to reduce hours or move staff to part-time working patterns.

The furlough scheme, formally known as the Coronavirus Jobs Retention Scheme, will be phased out completely by September – some 18 months after it was first introduced at amid the first nationwide lockdown at the start of the Covid-19 pandemic.

The BCC warned that if the latest changes in furlough leads to mass job losses, ministers must ensure those impacted can retrain and find new jobs easily.

Usdaw, a union which represents a large number of retail shop workers, said the furlough scheme being tapered off was set to be a “devastating blow” for the sector.

“The loss of support through the Jobs Retention Scheme will be a devastating blow for many retailers who are just about clinging on to their business and could result in further job losses,” Usdaw general secretary Paddy Lillis told Retail Gazette.

“Furlough has been an absolute lifeline for many workers and employers, it shows what can be achieved when the Government works constructively with trade unions and employers.

“With over 180,000 jobs lost across the industry last year and predictions of up to 200,000 job losses this year, we need immediate action from the Government to reduce rents and rates for high street retailers, alongside levelling the playing field with an online sales tax.

Lillis said that because the pandemic has pushed many retailers and retail staff to breaking point, government measures were needed that matched the scale of impact experienced across the sector.

“Retailers need urgent action to deal with the immediate crisis and a longer term strategy to deal with some of the more fundamental structural issues facing the industry,” he added.

“Usdaw is calling for the Government to adopt a recovery plan for the retail sector.”

Usdaw is now urging the government to extend the business rates holiday in England at 100 per cent until the end of the financial year, highlighting how this is already the case for Wales, Scotland and Northern Ireland. The union has also said here needed to be fundamental reform of business rates.

BRC business and regulation director Tom Ironside agreed.

“While the level of job losses the retail industry could incur as furlough ends is uncertain, as the largest private employer in the UK, government must take the right steps to ensure a successful future for retail,” he told Retail Gazette.

“The most effective intervention government can make is to meet their commitment to fundamentally reform business rates, reducing the significant burden of this property tax on retailers.

“Additionally, government must fix the flawed Apprenticeship Levy that fails to address the skills that are currently scarce in the UK labour market and help employees to acquire new skills needed as the industry transforms.”

Federation of Small Businesses chairman Mike Cherry said the phasing out of the furlough scheme would “hit small employers the hardest, many of which have only just reopened, or are operating on a much-reduced scale”.

Unfortunately, as furlough and other protections are due to come to an end next month, some businesses will be forced to make redundancies and others may go under – taking much needed jobs with them,” he said.

“It is likely that there will be more people needing to find new work in the Autumn.”

“We need to see the government backing small businesses and supercharging the employment environment to create as many new jobs as possible.”

Cherry stated that this means looking at ways to offset spiralling costs for small businesses, including those in retail.

“Rather than hiking employer National Insurance contributions (NICs), expanding the Employment Allowance to create more jobs would be the right place to start,” he added.

“Employer NICs is a jobs tax that prevents small firms both recruiting and retaining staff.”

Cherry also echoed Usdaw’s and the BRC’s call for urgent business rates reform, and that stated that retailers in England needed to be granted an extension of the 100 per cent business rates relief for the full financial year.

“With the number of people out of work likely to rise, skills shortages are also a concern,” he added.

“We’d like to see government updating existing schemes like Kickstart, to make sure they’re having the biggest possible positive impact.

“This includes making sure the scheme can help more disabled people, including those over the age of 24.”

Andy Prendergast, national secretary for commercial services at union GMB, said the best solution to retain staff in the current environment involved increasing wages and improving terms and conditions.

“As staff shortages are beginning to bite across the economy, many retail workers are finding they can get more money in other roles and are understandably leaving the sector to take advantage of this,” he explained.

“As a union we find that retention is easiest amongst companies that have competitive pay with good terms and conditions, which provides security and a decent standard of living.

“At the moment, too many people are finding that retail employers are simply unprepared to match offers from elsewhere.

“There is also an issue with retail staff feeling threatened by Covid and actively moving into non-customer facing jobs as this reduces their chances of infection.

He said there was clearly an argument for the extension of the furlough scheme, particularly in some retail areas such as high street travel agents which are likely to find the recovery to be much longer.

“We also believe that the government needs to look at dealing with the tax advantages provided to online retailers, both in order to raise revenue and level the playing field for the traditional footfall reliant parts of the retail sector,” Prendergast added.

“If sufficient revenues can be created, longer term cuts to business rates specifically for retail should be looked at as a way of preserving jobs in the sector and the town centres they ultimately support.”

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