Farewell to furlough


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Now that the end of the employment support scheme is in sight, Business Control’s Richard Starkey considers the impact – and offers some strategies for survival.

Furlough was never going to last for ever. Introduced by the government in March 2020, it has supported an incredible 11.6 million jobs and provided thousands of companies with a lifeline through these turbulent times. At the beginning of July, the scheme began to be wound down and employers will have to shoulder a greater proportion of the costs before it stops altogether at the end of September.


Where we are

At the moment, the government contribution for staff on furlough is 70% and employers are responsible for paying the remaining 10% (80% of the employee’s wage up to a maximum of £2500). In August and September, the government contribution will be 60% and employers will have to pay 20%. And in October, the scheme is being switched off completely, so the cash impact will really hit hard in November when there will be no input from HMRC at all.


In real terms, the Institute for Fiscal Studies has calculated that the bill for employers keeping a member of staff on furlough will rise from £322 in July to £489 in August and September. This is on top of pension and National Insurance contributions. If your business is doing well – and, to be fair, many within our area and the Business Control ‘community’ are having a healthy 2021, all things considered – it’s a manageable amount. But if not, the next quarter, leading into Christmas, is likely to be a struggle.



We have clients in the hospitality and entertainment sectors who are certainly struggling. Lockdown has bitten hard and even after reopening they have had to contend with bad weather, isolating staff, reduced customer capacity and more. It’s been a very challenging period that will only get more intense over the coming weeks as those staff costs increase.


Similarly, there are many other companies that are having to contend with social distancing and reduced headcounts. Plus, there’s the expense and rigmarole involved with keeping Covid-compliant.


Meanwhile, we’re waiting for the country to ‘open up’ properly and for many businesses it will be a race against time to get money coming in through the door. That said, we’re still not sure what capacity and rules companies will be working under when those doors are finally flung open. Ironically, furlough was extended (four times) to 30 September – long past the expected end of lockdown – to provide businesses with certainty and to prevent the need for yet another extension.


Cash remains king

At the heart of all this is the businessowner’s old friend (or enemy): cashflow. Now, more than ever, is the time to be keeping a very sharp eye on what’s due, what’s late and what’s owing. It’s something I’ve covered in these blogs many times before, but it bears repeating.


It’s also worth noting again that, if you are struggling – if the order book isn’t filling up and you’re gradually losing clients – you may need to take a good, hard look at your staffing levels and act accordingly. Redundancies are, sadly, a fact of business and it’s better to make painful cuts today rather than lose the business altogether tomorrow. I certainly can’t imagine that furlough will be extended for a fifth time.


As always, my team and I are here for you if you need to crunch the numbers and take a closer look at your financial situation.


Looking ahead

The Business Control team is also here for you if the future’s looking bright and you’re weighing up expansion plans. As I mentioned earlier, many of our clients in all sorts of sectors (notably digital) are doing well, and a financial forecast is a proven way of discovering if you can afford to grow or invest in your business.


The great rollback of furlough has begun. And in addition, the business rates holiday will also start to become less generous, and delayed payments for VAT will restart.


So, are you on the ropes already or fighting fit and ready for the next round? The answer is in your accounts.



Don’t forget to check out the rest of our Accounting for COVID-19 blogs here, and please check back periodically to get the very latest insight and information from the Business Control team.

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Business Control Limited
Red Lion Yard,
Odd Down,
Bath, Somerset,
BA2 2PP,
United Kingdom

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