Some clients in sectors most significantly impacted by the coronavirus are increadibly concerned that the UK Government hasn’t listened to their request for the furlough, job retention, scheme to be extended. 

According to the Office for National Statistics (ONS), the UK is in the largest recession on record.

Its latest estimate shows that the economy is now 17.2% smaller than it was in February 2020. The effects of which have been felt most, in sectors that have experienced the most significant public health restrictions and the effects of social distancing.

Services comprise 79.6% of the UK economy and elements of the sector, particularly hospitality, leisure and parts of retail, are in real pain and at risk of never recovering fully, if at all.

Interestingly, these same areas of business have disproportionately been impacted by the good intentions to raise people out of poverty, in recent years, with the introduction of the National Living Wage.

Listening to clients there is deep sadness at the prospect of many workers being at risk of being thrust back into poverty. A consequence of job losses when furlough support ends.

Some highlight that perversely the National Living Wage Increase that came into effect in April 2020 could be the straw that breaks the camels back.

The Institute of Fiscal Studies in an article earlier this year suggested the Government think again about increasing the National Living Wage and even explore the possibility of a temporary cut.

At least 750,000 jobs have already been lost in the UK, as a direct consequence of coronavirus, according to the Financial Times. With circa eight-million people being paid by the state’s Furlough scheme, we can expect to see unemployment increase as support winds down.

The Bank of England’s own forecast is that unemployment will double to approximately 7.5%. Given the scale of the downturn and the risk of further disruption caused by Covid-19 that figure could well be  conservative.

Sectors most at risk have for some time been asking for ongoing targeted support from central government, which has been resisted so far.

The devastating impact on people who lose their job will potentially compound the mental health crisis that already exists. Plus, unprecedented levels of unemployment, will only serve to deepen the recession.

The Chancellor has already made it clear that ‘not all jobs can be saved’, which is diametrically opposed to the message at the start of the pandemic from government which was ‘we’re all in this together’.

Those people we have spoken to, many of whom have done everything they can to retain colleagues, continue to balance the need to cut costs whilst wanting to save jobs.

They acknowledge there is already a predominance of lower wages and flexible working in their business. They feel hampered, unable to negotiate pay reductions as a means of limiting job losses, because of the requirement to comply with the National Living Wage.

Perhaps now is the time for the Government to reconsider the advice from the Institute of Fiscal Studies? Could this be part of a package of measures including things like:

[a] reducing employers NI contributions?

[b] raising the Tax and NI threshold for individuals?.

Doing so could offer some financial protection to disposable income for the lowest paid.

This might not save jobs where Covid-19 has presented some larger organisations with the opportunity to accelerate longer-term restructuring plans. But for smaller business, it might slow the pace of change and allow time to recover.

Of the people we have spoken to, nobody wants to see those already struggling on lower incomes to be further disadvantaged. But, is this solution preferable to potentially long-term unemployment for some?

A temporary pay cut, even if that were to take a significant number of people below National Minimum Wage, might be better than the human and financial cost of unemployment?

Be Prepared…for a straightforward, no nonsense approach to business consulting.  Simply put, Red Orchid helps clients achieve what they want and protect what they have…it really is no more complicated than that.

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