Furlough plans could cost £40bn in just three months, think tank says

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Businesses up and down the country have been forced to close their doors.

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The Government’s plan to cover 80% of the salary of furloughed workers could cost up to £40 billion in just three months as more companies decide to take up the scheme, a think tank has said.

Between £30 billion and £40 billion could flow from Government coffers as at least a third of workers in the private sector are likely to be sent home, the Resolution Foundation said.

The foundation analysed new data from the British Chambers of Commerce (BCC) which showed that more businesses than first thought would furlough staff.

“The cost of the scheme depends on firms’ take-up and the length of time workers need to be furloughed for,” said Torsten Bell, chief executive of the Resolution Foundation.

“But with recent surveys implying that at least a third of the private sector workforce could be paid through the scheme, it is likely to cost as much as £30 billion to £40 billion over three months.”

Although expensive, the social cost of millions going unemployed without the Government guarantee would be “far, far greater”, Mr Bell said.

Without it, workers face “catastrophic hits to their living standards”, he said.


One fifth of companies who responded to the BCC’s survey are now planning to furlough all their staff, up from 17% in the last survey.

A total of 37% of respondents said they will furlough between 75% and 100% of their workforce in the coming week.

“We have not put out a specific projection or an estimate of the take-up of that scheme,” Chancellor Rishi Sunak said on Wednesday afternoon.

“We did that so that people were not laid off, they were not unemployed, they had a good income to get them through this, and they remain attached to their company and their employer.


“If it ends up being significantly used I will view that as a success if it means that we get through this and then can bounce back quickly.”

The survey also found that only a small fraction of businesses have been able to get hold of emergency loans to keep ticking over, despite promises that money would start flowing quickly.

Just 1% of firms have successfully accessed the Government’s Coronavirus Business Interruption Loan Scheme (CIBLS), which was announced by the Chancellor last month, according to the data.

The results found that 8% of the companies that responded had been unsuccessful in their applications.

Firms said that a complex application process and slow replies had held them back.

Businesses have been given access to the Government-backed loans to help them through the coronavirus outbreak.

Meanwhile, smaller companies can apply for grants of up to £25,000, depending on their size.

According to the survey, 7% of respondents are receiving grants.

But 14% had been unsuccessful in trying to get grants.

Most of these, 83%, said they had not met the criteria, while 14% said the response from authorities was too slow, or did not come at all.

“Our latest data shows that many businesses face a cliff-edge scenario, either at the end of this month or over the course of the next quarter,” said BCC director general Dr Adam Marshall.

“We’ve seen a big jump in the number of firms furloughing staff, and many are now starting to apply for access to Government loan and grant schemes to keep themselves afloat. Yet our research suggests that support is only starting to reach firms on the ground.”

Six per cent of more than 1,000 respondents to the survey, which was performed last week, said they have already run out of cash.

Meanwhile, 57% of companies said they have cash to last three months or less.

Most of the respondents, 77%, are in the service sector, with 23% in the manufacturing sector.

Just under half are small businesses with between one and nine employees.

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