Despite Dramatic U-turn, Redundancies Remain a Real Risk

Despite a dramatic U-turn by the Chancellor, the announcement may have come too late to prevent redundancies said, Blick Rothenberg.

Andrew Sanford, a business advisory partner at the firm said: ‘Rishi Sunak today dramatically changed the terms of the job support scheme, which is now far more closely aligned to the old furlough scheme. However, there is still no provision for Employers National Insurance and Pensions being reimbursed tor firms that are struggling therefore for businesses with no funds, redundancy and liquidation may be the only option available.

He added: ‘It is concerning that his job support scheme may disproportionately benefit older and skilled workers. The unskilled are easier to replace and so the continuing cost may mean their services are dispensed with. Older workers may have more years of service and so redundancy costs may mean they are retained compared to a new joiner. Some additional funding for the under 25s in covering their employer’s national insurance would have been welcomed.’

Andrew said: ‘In the U-turn, he has made two significant changes. First, you can qualify for the scheme if you only work for 20% of the time, as opposed to 33%. Many businesses were struggling to meet this target, and it must be hoped that they have not made their staff redundant already.

‘Secondly, the minimum employer funding percentage has gone down from 55% for a 33% normal week, to 24% for a 20% week. For businesses with negligible turnover, this must give them the much bigger carrot to continue, and retain their key staff.’

He concluded: ‘Small business grants were announced for tier two areas. These will be up to a maximum of £2,100 a month for affected hospitality and leisure businesses. Local Councils are responsible for the distribution and calculation of the grants, and I am concerned that there may be delays in distributing the grants. Many hospitality businesses will also feel that this will not cover perishable stocks which may have to be thrown away.

‘Once again there is no provision for the owner-managed business who pays only dividends. They will feel increasingly alienated by the lack of support for their entrepreneurial risk. There was no announcement on business rates relief from April. Urgent clarity is required from the government on this area, as many hospitality businesses simply will not be able to pay the rates in April.’