Your views: the operation and effectiveness of the local furlough

As the hospitality sector shuts down in Northern England, the Chancellor announced a new scheme to further protect jobs

With the Coronavirus Job Retention Scheme winding down this month, businesses are expressing a lot of concern about their ability to preserve jobs, particularly in hard-hit sectors such as hospitality, events and the arts.

The Job Support Scheme has not provided all the answers.

It is now clear more needs to be done to protect jobs in areas where stricter lockdown measures are now being imposed.

Chancellor Rishi Sunak, therefore, announced a new local furlough to plug this gap on Friday. Details of the new scheme:

  • applies to all businesses forced to close due to lockdown restrictions,
  • applies where employees can’t work for one week or more,
  • the Government will pay two-thirds of those employees’ salaries,
  • this includes businesses told to operate on a collection-only or delivery basis.

We asked accountants serving those most-impacted sectors for their views on the new scheme.

I’m disappointed with the Government ’s ‘one-size-fits-all’ approach

David Fort, managing partner Haines Watts, Manchester                                 

While this measure worked in the spring, I think the Government could be a bit smarter in how they allocate support now. There are some businesses that have flourished in the current situation and have certainly managed to keep going. However, there are also some sectors that have been absolutely decimated and I think the mix is badly skewed.

Initially, Sunak was opposed to extending the furlough scheme, but suddenly the goalposts have been moved again. I think there has been a complete lack of consistency and clarity. Like a lot of businesses, we have put a lot of time and effort and invested money into getting the office and the environment Covid-19 secure.

I know a lot of my hospitality clients have done the same. You almost feel as if that has been wasted really. We’re all feeling as if we have been led down a path that we thought was the right way and then suddenly it’s a dead end.

My hospitality clients have all been gearing up to start again after being actively discouraged to open up with the Eat Out to Help Out Scheme, so it’s massively unfair that the hospitality sector is being blamed in this way.

I have a nightclub client that is very much focused on students and while the 10pm curfew was in place, they were just about covering costs. They weren’t making any money, but at least they were able to pay staff. Further restrictions mean they are not going to be viable. I also have a live events client and that again has been affected. Other clients, particularly those in the home improvements sector, are absolutely flying.

Government assistance going forward very much needs to be targeted by sector and geographical location. The North of England now faces an anxious wait to see the full impact.

Next step: Keep agile and make sure that you take positive steps to try and manage the business effectively ( based on the latest Government guidelines ). I know this is really difficult with so much confusing restrictions and information around.

Verdict: More help should be targeted specifically at most impacted sectors.

The support is welcome, but limited

John Lawrence, director, Guida Accountancy

Any scheme is welcome and it will help save some jobs. However, the scheme only provides limited support to businesses that are still recovering, and in many cases barely surviving, from the period of full lockdown. Although I do not deal with any clients in the North, I have spoken to some in Essex (who fear local lockdown or another national lockdown) and most say that job losses will be inevitable even with support. Cash reserves are very low and paying even part of the salary with no income coming in just will not be possible.

The scheme does not offer support for many business owners or self-employed. Local lockdowns will affect businesses that can remain open but will inevitably see a drop in trade, whether through lack of spending by consumers or through the loss of their business customers who are forced to close. As payments are made to retain ‘viable’ jobs businesses will need to decide what is viable. That will be a difficult choice as they will probably need to let some staff go even though there will need them when they reopen.

Next step: Accountants should be advising their clients about the new scheme and help businesses with forecasting, particularly cashflow. Ensuring clients are making claims as early and accurately as possible, and claiming for everything they can. Help businesses to look at their costs to see where short term savings can be made.

Verdict: It may save some jobs, but not necessarily enough.

It doesn’t support employers on NIC and pensions payments – this isn’t sustainable

Nigel Morris, employment tax director, MHA MacIntyre Hudson

The JSS expansion scheme will provide some income and certainty where localised restrictions apply, but it doesn’t support the costs of NIC and pension contributions like the old furlough scheme did. Employers may be able to bear the cost of NIC and pensions for a short period, particularly if they’ve been able to trade over the Summer, but paying overheads and payroll costs with little or no trade revenue isn’t sustainable for long periods of lockdown. Also, some sectors will not even have been lucky enough to have Summer trade, so the JSS may be too little too late for them.

An employer with multiple sites or locations may have employees on the same payroll paid under two different schemes. Some might get ‘standard’ JSS, calculated using the set of rules where, providing an employee works at least one-third of their hours, they are paid two-thirds of their wages for the hours not worked. Other employees might get the expanded JSS scheme where they are paid two-thirds, even if no hours are worked, providing the business is forced to close due to lockdown restrictions. Many of them will know how complex flex-furlough was and the two versions of JSS could be even more challenging to operate, claim and get right.

For businesses it is not only the uncertainty of local lockdown, but the complexity and challenge of how they can remain resilient in these uncertain times.

Next step: For all of our clients we have been recommending that they review CJRS claims, make early corrections and ensure their finances are on a firm foundation. In addition, we’re helping clients get the necessary paperwork together to support their Job Retention Bonus (JRB) claims, which can be applied for from February 2021. Finally we’re producing JSS checking tools, as we did for CJRS, to help smooth the claim calculations reclaim processes, which are inevitably unlikely to mirror payroll and require supplementary calculations.

Verdict: The local furlough extension to JSS may be too little too late.

We need a long-term strategy – not short-term stopgaps

Russell Nathan, head of hospitality, HW Fisher

It’s a serious time for British business. The extension to furlough measures are reassuring, especially for those in hospitality who are forced to shut their doors, but the Government are still missing the mark when it comes to a long term strategy. Christmas is less than 80 days away and is the biggest revenue driver of the year for those in hospitality and retail – the next three months is normally the quarter in where they make their profit for the year.

Hospitality is quick to be blamed for the virus spread but the evidence shows it is not the black spot. Measures such as the 10pm curfew are having a disproportionately negative effect on the industry relative to the benefits.

Next step: The Government must now focus on building a clear roadmap to support businesses to scrap the 10pm curfew, extend insolvency protection, tackle the Landlord issue, and make a plan that will last beyond the next month.

Verdict: The Chancellor might not be able to save all businesses – but he can save more.

Mark Rowland is a journalist and former editor of Accounting Technician and 20 magazine.

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