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Firms appeal for government help as furlough scheme closes

Emma Lunn
Written By:
Emma Lunn

Today is also the last day for the small employer sick pay rebate, the Apprenticeship Incentive, and the VAT reduction for hospitality and tourism businesses.

The Coronavirus Jobs Retention Scheme (CJRS) closes today as the government withdraws pandemic support for businesses.

The Federation of Small Businesses (FSB) described the withdrawal of the various support measures for firms as the ‘autumn storm’ and warns that firms will face numerous challenges going forward.

Other pressures on businesses at the moment include inflation, staff and supply shortages, petrol shortages, energy price spikes, increased VAT, and the prospect of major tax rises and the ending of the suspension of insolvency rules.

The FSB is calling on the government to increase the Employment Allowance, to replace and reform the New Enterprise Allowance, to keep the Apprenticeship Incentive in place, and to focus on supporting small businesses to create jobs.

The end of the furlough scheme coincides with the withdrawal of the small employer Sick Pay Rebate and the end of the Apprenticeship Incentive – meaning that small employers could find their operating environment becoming less hospitable as of 1 October.

The furlough scheme provided 60% of the wages of furloughed staff up until the end of September, with about a fifth of employees in businesses with two to four employees still on full or partial furlough in early September, according to HMRC.

Small businesses have been far heavier users of furlough than large firms, reflecting the disproportionate impact of the pandemic and restrictions on smaller firms – and the gap has grown as the scheme has neared its end.

The government has not published statistics yet on the usage of the Coronavirus Statutory Sick Pay Rebate Scheme, but the FSB believes it is likely to be in the hundreds of thousands. Alongside testing and vaccinations, the sick pay rebate gives confidence that employers can afford the bill when staff fall sick or are told to self-isolate.

Meanwhile, the Apprenticeship Incentive, offering £3,000 to businesses in England which took on an apprentice, also runs out today. This follows a fall in the most recent apprenticeship numbers.

In addition, the VAT rate for hospitality and tourism businesses will rise to 12.5% from 5% as of 1 October.

The restrictions on the issuing of winding-up petitions (WUP), a common trigger for corporate insolvencies, also expire today – although the threshold for the debt that a company must owe to its creditors before a WUP can be issued against it has been raised to £10,000, from its pre-pandemic level of £750, until 31 March 2022. Creditors will also be required to give debtor companies 21 days to respond to a WUP with payment proposals during this period.

Mike Cherry, national chair of the Federation of Small Businesses (FSB), said: “It’s potentially a dangerous moment. As the weather turns colder, so too will the operating environment for many firms. With recent economic growth numbers having fallen below expectations, the upcoming festive season may not provide as much of a boost as hoped to many small businesses’ bottom lines.

“We all know that the unprecedented support to businesses and individuals which the government provided to forestall a full-on economic collapse could not last forever, and that some sort of ‘business as usual’ would need to be resumed. But the government needs to think carefully about the signals it wants to send to the business community. The memory of how National Insurance and dividend tax rises were pushed through parliament with no time for proper scrutiny is fresh in every business owner’s mind, and has dealt a significant blow to stores of goodwill. The prospect of huge jobs tax increases now hitting in April will lead to an extra 50,000 people joining the unemployment line.

“Firms feel assailed on all sides, from energy prices and fuel shortages to longer-term changes to taxes which will disincentivise growth and investment. Small businesses need to feel the government is on their side; however, recent decisions made have not had their interests at heart.”