It has been estimated that the Coronavirus Job Retention Scheme could cost from £30 billion to £40 billion over the course of the next three months.
This is according to the Resolution Foundation think tank. Also despite only a tenth (10 per cent) of employers so far using the scheme according to the Treasury, British Chambers of Commerce (BCC) research states that 37 per cent plan to furlough the majority of their staff (75 per cent – 100 per cent) in the future.
Furloughed workers are those whose workplaces have been forced to close due to COVID-19, leaving them unable to work. This does not mean they have been made redundant and enables their employers to gain support to continue paying a part of their staff’s wages. The Government will pay 80 per cent of employees’ wages ( up to £2,500) who have been furloughed.
The Resolution Foundation has also predicted that if this pattern is to carry on then 8-11 million private sector employees will be furloughed.
Torsten Bell, chief executive of the Resolution Foundation said:
By subsidising up to 80 per cent of workers’ wages, the scheme will help millions of workers who would otherwise face catastrophic hits to their living standards. The cost of the scheme depends on firms’ take-up and the length of time workers need to be furloughed for.
But with recent surveys implying that at least a third of the private sector workforce could be paid through the scheme, it is likely to cost as much as £30 billion to £40 billion over three months. The economic and social cost of mass unemployment in the absence of such a scheme would be far, far greater.
Dr Adam Marshall, director general of the BCC said:
Our latest data shows that many businesses face a cliff-edge scenario, either at the end of this month or over the course of the next quarter.
We’ve seen a big jump in the number of firms furloughing staff, and many are now starting to apply for access to government loan and grant schemes to keep themselves afloat. Our research suggests that support is only starting to reach firms on the ground.