15 May 2020
By Stuart Patrick Chief Executive Glasgow Chamber of Commerce
When the Chancellor on Tuesday announced the extension of furloughing until the end of October there was a tangible sigh of relief across the Glasgow business community.
The Job Retention Scheme has been by far the most successful measure in keeping people in employment during the crisis. It is an easy scheme to use, a grant and directly covers a reasonable percentage of the costs involved in funding a job. It was also set up by HMRC in the timescales promised by the end of April and money was being paid into company bank accounts within days after an application was made.
In the US, where support has been aimed towards employees rather than employers, unemployment has soared by tens of millions and the link between employers and their staff has been cut. Here the JRS has kept that link, making it easier both for companies to recover as the crisis passes and for people to hold on to livelihoods.
Our own recent survey of 200 Glasgow Chamber members showed that nearly two thirds of the city’s companies are using the scheme and furloughing some or all staff. One in every five companies is temporarily closed through no fault of its own – these are restaurants, small shops, hairdressers, hotels, bars, clubs and gyms not allowed to operate and with no choice but to shut their doors until the lockdown rules allow them to reopen.
Without furloughing, most of their staff would have been made redundant. When we asked what the most important measure would be for keeping those jobs alive it was the extension of this scheme.
Most businesses in Glasgow are small. In our sample, three quarters employed fewer than 50 people. These are not large rich companies with wealthy shareholders. They don’t have easy alternatives to source funds, and they don’t have the capacity to take on substantial new loans. The JRS has been the main lifeline for businesses that were trading successfully before the crisis and which will do so again when the crisis passes.
A main problem with the JRS has been its flexibility. Ideally companies would like to use the scheme to fund part-time working alongside the full-time three-week long furloughs that the scheme currently permits. That was rejected in the early design as it was seen as overly complex to administer.
But it is exactly what the Treasury is now likely to look at in future months to help bring staff back into active work whilst allowing firms to rebuild the trade they have lost.
Businesses all want to bring their staff back to work when they are allowed to do so. The JRS has so far made it more likely that will happen.
This article first appeared in the Glasgow Times
