10:21 am, July 10, 2020
Car dealer groups and manufacturers are in line for huge furlough scheme windfalls that could stretch into millions of pounds if they bring back staff.
Chancellor Rishi Sunak announced this week that every business that brings back a staff member from furlough and employs them until January on a wage of £520 a month or more will get a £1,000 bonus per employee.
Most dealer groups furloughed more than 80 per cent of their staff during the lockdown as they shut showrooms and ran their businesses on a skeleton staff.
Vertu was typical of the dealer groups – furloughing 82 per cent of its 5,877 staff, or around 4,800 employees.
The group was quick to bring back its colleagues too as business for the group ramped up quickly and is potentially in line for a £4.8m pay out from the government.
Marshall Motor Group boss Daksh Gupta told us in April that he had furloughed 3,900 staff members and is working hard not to make any redundancies.
If he brings them all back he’ll get a £3.9m payout from the government.
One dealer group boss – who was in line for a payout nearing £1m – told Car Dealer Magazine he had two thoughts about the money.
‘While it will be very welcome to receive the cash, especially after the year we’ve had, I am in two minds as to whether it is a good idea,’ said the boss, who did not want to be named.
‘We need these people to run our businesses and would have had to bring them back anyway. Getting £1,000 to do it is very nice, but I don’t think the government needed to do it.’
He said that decisions about redundancies for other members of staff wouldn’t be put off because of the ‘£1,000 carrot’.
‘That amount won’t make me change my mind about making redundancies – so to that effect it’s pretty pointless,’ he added.
‘If businesses need staff back, they need staff back. If they don’t, they won’t. £1,000 won’t make a blind bit of difference to the decision making process.’
Jaguar Land Rover furloughed 20,000 UK employees – and if it brings them all back will receive £20m from the government in January. Nissan furloughed around 6,000 workers and could get £6m.
If all furloughed workers are taken back by their employers the scheme will cost the government £9bn, the chancellor said.
‘Leaving the furlough scheme open forever gives people false hope that it will always be possible to return to the jobs they had before,’ Sunak told MPs.
‘The longer people are on furlough, the more likely it is their skills could fade, and they will find it harder to get new opportunities.
‘It is in no-one’s long-term interests for the scheme to continue forever, least of all those trapped in a job that can only exist because of government subsidy.’
More than 9.4m people have been put on furlough, with the government covering up to 80 per cent of their salaries, at a cost of £27.4bn, according to the latest figures.
Many workers in the car industry remain on the furlough scheme as car dealers slowly get back up to speed. While June has been buoyant for many car dealers there are concerns among management as to how long this can last.
David Kendrick, partner at accountants UHY Hacker Young said: ‘This is undoubtedly good news for dealers as any extra cash will certainly help.
‘It remains a little unclear as to exactly when the employee has to be unfurloughed at present with differing views as to whether it applies to anyone furloughed from day one or if it is for those who return post the announcement on Wednesday of this week.
‘With a significant number of dealers now at 60-70 per cent of staff back in the businesses, let’s hope it relates to the whole period as it would certainly help offset losses incurred during lock down.
‘Early signs have been extremely encouraging and let’s hope that this pent up demand continues as we head towards September.’
Kiril Moskovchuk, an employment specialist at motor trade legal advisers Lawgistics said he didn’t think the £1,000 would be an incentive to keep staff on.
He said: ‘I am not sure the bonus will be a sufficient incentive to keep the staff employed if there is not enough work and the employer will have to subsidise the wages, especially considering that the level of support under the current flexible furlough scheme will be gradually going down.
‘I am afraid despite the announced bonus some businesses may prefer to press ahead with cutting jobs and claim some of the notice pay due on redundancy through the furlough scheme.’
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