UK Government told to extend furlough scheme into 2021 to prevent 'tsunami of job losses'

Oscar Williams-Grut
Senior City Correspondent, Yahoo Finance UK 18 June 2020

A Job Centre Plus in London. (PA)
Union's bosses have warned that the UK faces a “tsunami of job losses” unless the government extends its job retention scheme and provides targeted support to the most vulnerable industries.

“I really, really am fearful about a tsunami of job losses as we start to introduce changes to the job retention scheme and employer contributions,” Steve Turner, assistant general secretary of Unite, told parliament’s Business, Energy and Industrial Strategy select committee on Thursday.

Turner said he was already seeing companies start consultations on thousands of redundancies in sectors like car manufacturing, ahead of changes to the job retention scheme in August. Bentley, Aston Martin, McLaren, and Jaguar Land Rover have all announced job cuts in recent weeks.

Read more: UK employers have slashed 600,000 staff since March

9.1m people are furloughed under the government’s job retention scheme, almost a third of the UK’s workforce. Under the scheme, which was announced in March, the state pays 80% of idled staffs’ pay to a maximum of £2,500 per month.

Unite's Steve Turner speaking during a rally at the Harland and Wolff shipyard, Belfast, Northern Ireland. (PA)

The programme has so far cost the Treasury over £20bn ($25bn) and employers using the scheme will be asked to start contributing to its cost from August.

Turner and other union bosses warned the gradual tapering of the scheme would likely provoke thousands of job losses, with many industries in no position to contribute to costs.

Read more: 9 million workers furloughed as cost of scheme hits £20bn

“When the changes in the JRS [job retention scheme] happen in August, even though they’re only moderate in August, that will stimulate job losses and they are already building up,” said Mike Clancy, general secretary of Prospect.

“This is not posturing. It is a genuine reaction from employers who do not have the cash to fund even moderate changes in the JRS.”

Clancy was specifically referencing the theatre and performing arts industry. His warning came hours after legendary West End theatre producer Sir Cameron Mackintosh started redundancies on his productions, saying he could not hold out for a safe reopening of theatres.

Read more: Culture secretary hints at theatre bailouts as job cuts bite

“The creative industries are facing a huge and real crisis now,” Christine Payne, general secretary of actors union Equity, told MPs.

She estimated 400,000 jobs could be lost across the sector without more support from government. Payne said the job retention scheme should be extended “until at least March, April next year.” The programme is currently due to finish in October.

Christine Payne, general secretary, Equity. (PA)

Clancy added that any changes or extension must be announced urgently to avoid widespread job losses.

“This needs to be sorted within three or four weeks,” he said. “It’s an absolute crisis that needs to be addressed now.”

Read more: MPs warn over a million workers 'locked out' of job schemes

All the union bosses who gave evidence to the select committee called for more targeted intervention to help specific sectors that may struggle to bounce back quickly as the UK economy begins to reopen.

“We need an economic plan for key sectors of our economy,” said Gary Smith, secretary for GMB Scotland.

“Our recovery is not going to fall from the sky and it can’t happen when we’re continuing to export jobs that could and should be done here.”

Sectors singled out for targeted support included retail, hospitality, leisure, aviation, and manufacturing, as well as the creative arts.

Read more: Call for Treasury to take £15bn stake in British firms — then sell shares to public

“What we need is the government to take an equity stake in some of these foundation industries to give real long-term security,” Turner said.

“We’ve intervened in the past, and I think we’ll have to intervene in the future a bit like they’re doing in Germany, France, Spain, and even the US.

“I think this will be devastating without direct government intervention at this point. That does require this sectoral arrangement.”

Tory MP Bim Afolami MP earlier this week called for the Treasury to establish a £15bn ($19bn) “Recovery Fund” for British businesses that would see the government take direct stakes in businesses.

The government is reportedly considering such a project — codenamed Project Birch — although no formal announcements have been made.