How will the End of Furlough Impact SMEs?
In September, the furlough scheme will come to an end and this is likely to have a significant impact on some SMEs.
Many will have had to decide whether they can take back furloughed workers or make them redundant.
In fact, legally, those firms wishing to take this route in time for the 30 September deadline should have already begun the redundancy process.
But if the end of furlough is going to add to the financial pressures SMEs face, are there ways in which they can alleviate them?
What Has Happened During Furlough?
Employees who have been furloughed cannot do work for their employer during furlough.
Under the scheme, the Government has paid 80% of their monthly earnings for the hours they’ve not worked, up to a maximum of £2,500 per month.
From June 2021, the furlough scheme has begun to wind down, with tapered support. This means the employer has needed to contribute more towards the hours that their staff don’t work.
According to official analysis from the New Economics Foundation (NEF) workers spent around 6.4 billion hours on furlough in 2020, with a further 3.3 billion hours predicted for 2021.
What Will Happen When Furlough Ends?
The precise impact is uncertain, but NEF analysis suggests that 850,000 could be at risk.
Already, the scheme has been extended, possibly saving up to three million jobs. But this might not avoid an Autumn surge in unemployment.
This is against a backdrop of structural economic shifts in the UK economy. This is an ongoing evolutionary change, where primary industries, followed by their secondary successors, have declined.
In their place has been the huge rise of service industries. But now we’re seeing the rise of the quaternary industry, part of the knowledge-based economy.
There are implications here for more traditional workforces. But at the same time, there’s now a severe shortage of labour in certain key areas such as logistics, transport, manufacturing and hospitality.
But does a labour shortage spell good news for those furloughed workers who lose their jobs?
Unfortunately, no. According to the Resolution Foundation, there is a mismatch of skillsets.
What Help Can Employers Access?
One of the most pressing issues SMEs have faced during the pandemic is access to cash.
With cash flow slowing to a trickle, many have had to resort to the furlough scheme.
But the need for financial support runs deeper than this. As the economy emerges from successive lockdowns and the impact of Covid-19, being best prepared to re-engage and ride an upwards curve will be essential for recovery and growth.
The Government’s Bounce Back Loan Scheme has helped some, but others will have found they’re not eligible or may not wanted to face the prospect of borrowing more money.
For these SMEs, there are alternatives, however:
· Asset finance enables you to make vital purchases for your business without diverting your working capital or impacting your existing lines of credit
· Debt funding can provide a valuable cash flow lifeline through invoice financing or factoring.
There are also various bespoke loan and funding solutions worth exploring, along with short-term loans that provide valuable stop-gaps.
With furlough ending and the economy in a state of flux, SMEs need reliable ways of securing financial support that will allow them to respond flexibly and proactively to these economic demands.
Whether this is retaining or retraining existing staff or investing in new equipment, flexible access to funds is the key.