Pimlico Plumbers boss, Charlie Mullins discusses the long term economic effects of the coronavirus pandemic.
The true impact of the coronavirus lockdown is now starting to be felt by the economy, with a dramatic fall in GDP and the first signs of a negative impact on employment.
As a result of the Government’s Coronavirus Job Retention Scheme, those employment figures on first glance didn’t look too bad. However, while the furlough scheme is generous and innovative, it is disguising hidden unemployment.
It has created a ghost workforce that is of no benefit to the economy or businesses.
The Government is, quite rightly, warning employers that if they are making furloughed staff work, they will face tough penalties.
However, those employers who are delaying action to make furloughed employees redundant could equally be accused of not entering into the spirit of the original purpose of the Coronavirus Job Retention Scheme.
By paying 80% of peoples wages the Government is rightly protecting people whose jobs will return once firms allowed to open and they are able to return to normal.
Many employers, though, are able to calculate the numbers of jobs that will need to go, even if the economy recovers to their most positive projections.
I know of several business in different sectors who are keeping people on their books who they know will be let go once the job retention scheme ends in October.
In fact, according to a new YouGov poll, 51% of businesses were intending to make redundancies within three months of the furlough scheme ending. In a survey of 500 employers, 31% said that a fifth of their workforce is at risk and more than 20% said a third of their employees could be made redundant.
It would be fairer to the employees if they knew where they stood. It would also be fairer to the taxpayer who is footing the wage bill and it will be better for the businesses that they can plan and budget more effectively by making people redundant now.
In addition, it would also help those businesses that want to recruit who are currently playing a strategy game with chess pieces they can’t move because potential candidates are furloughed up until the scheme ends.
This could be achieved if the government converted some of the remaining funds for next few months into support grants to enable these employers to fund special redundancy pay-outs. This could put emergency cash into people’s pockets, but also give them longer to find another job, without facing the run up to Christmas in a very difficult competitive jobs market.
The Furlough scheme is an attempt to do the right thing by people who will be able to return to work, but by hiding unemployment it is also sadly giving people a false sense of security. Far better to transparent and honest about the situation and direct policy towards wider economic recovery and restructuring.
In the longer term the priority should be tax incentives to business designed to encourage them to invest and grow.
The Government should also continue the ‘levelling up’ agenda of investing in big projects around the country, which improve the business environment for all, and devising targeted schemes including adult apprenticeships that help unemployed people retrain.
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