Region’s leaders propose furlough changes to Chancellor to better protect jobs

18 May 2020

West Midlands leaders have called on Chancellor Rishi Sunak to make the furlough scheme more flexible in the months ahead so it can better protect the livelihoods of hundreds of thousands of workers across the region.

With sectors such as hospitality, tourism and leisure potentially facing further months in lockdown, fears are growing over the long-term security of many jobs in those industries.

A meeting of the West Midlands Covid-19 Economic Impact Group (EIG) was told by business leaders on Thursday May 14 that take-up of the Government’s Job Retention Scheme had been strong in the West Midlands and had been successful in safeguarding jobs and heading off widescale redundancies.

But the unprecedented scheme, which sees the Government pay 80 per cent of furloughed workers’ wages up to £2,500 a month, is set to finish in its current form at the end of July.

Although the Chancellor announced this week that the Coronavirus Job Retention Scheme (CJRS) would be extended from the start of August to the end of October, he said employers would need to “share with the government the cost of paying salaries”.

The EIG, which brings together business leaders, central government, banks, trade unions, and local authorities including the West Midlands Combined Authority (WMCA), has now written to the Chancellor welcoming the scheme’s extension but calling for it to be more flexible.

The region has also warned that the CJRS may be too blunt a tool to differentiate by jobs or sectors and there may be a role for further financial support for hospitality, tourism and leisure businesses.

Mayor of the West Midlands Andy Street, who chairs the EIG, said: “The furloughing scheme has been a lifeline for thousands of businesses and it has undoubtedly saved many West Midlands workers from redundancy.

“The extension is extremely welcome and will help provide certainty for businesses and employees, helping to underpin confidence and long-term planning in what are exceptionally challenging circumstances.

“But it’s vital the scheme becomes more flexible to allow part-time work under furlough and a shortening of the minimum three-week furlough period.

“Account must also be taken of the ability of businesses to shoulder the costs. Even as lockdown is eased, restrictions on business operations in certain sectors means there is a case for sector-specific support and especially for the hospitality, tourism and leisure sectors.”

The EIG has also urged the Chancellor to carefully consider the cashflow implications of the scheme, warning that companies may be put off from recalling staff if they do not have the money to pay wages.

The EIG said all effort needed to be made to provide firms with the ability to plan their cashflow.

Cllr Ian Brookfield, WMCA portfolio holder for economy and innovation and leader of City of Wolverhampton Council, said: “The furlough scheme has been vital in giving households and businesses some peace of mind during these troubling times.

“It has also helped us avoid large numbers of redundancies that would have badly scarred the long-term prospects of our workers, especially young people, leaving them demoralised and facing financial hardship.

“What we need going forward is a scheme that can meet the specific needs of those sectors that will have to remain in lockdown for some time to come. Making the scheme more flexible will help businesses stay alive in the longer term and also retain as many of their staff as possible when they reopen in the shorter term.”

Louise Bennett, chief executive of the Coventry and Warwickshire Chamber of Commerce, added: “We would urge the Government to look very carefully at prioritising particular sectors.

“A desire to prioritise manufacturing and engineering is understandable but our hospitality, tourism and leisure sectors should also be prioritised because we know they are likely to be the hardest hit by this crisis and the last to come out of lockdown.

“I think the principle of sharing the cost of furloughing is on the whole the right approach where businesses are realistically able to contribute. That way we have a greater chance of making sure these are real jobs going into the future rather than immediate moves to redundancy.”

The Government is currently paying the wages of more than seven million UK workers. Based on those figures, it is believed that as many as 400,000 workers in the West Midlands are on furlough.

It is thought the CJRS is costing the Government around £14bn a month.

The West Midlands’ civic, business and trade union leaders have committed to drive a ‘bounce forward’ to a more inclusive, environmentally sustainable economy.

Work has already begun on ten vital economic goals, mixing actions that can manage economic harm with those that drive ambitious long-term growth.

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