Car dealer groups across the country have begun to consult staff over mass redundancies as they prepare their businesses for a return to work.
With dealers likely to be allowed to return to work soon, following new government guidelines due to be revealed this Sunday, many groups are now planning to make huge jobs cuts.
Dealer group bosses speaking to Car Dealer Magazine have said they could be forced to make job cuts of 20-25 per cent of their workforce.
Currently, most dealers have a large proportion of their workforce on the government furlough scheme.
The chancellor Rishi Sunak has today promised there will not be a ‘cliff edge’ ending to the scheme.
Speaking to ITV News today, he said: ‘To anyone who is anxious about this I want to give them reassurance there will be no cliff-edge to the furlough scheme. I am working as we speak to work out the most effective way to wind down the scheme and ease people back into work.’
Yesterday I told ITV News that there will be no cliff edge to the Coronavirus Job Retention Scheme.
But as some scenarios show we are potentially spending as much on the furlough scheme as we do on the NHS, I am working out the most effective way to ease people back into work. pic.twitter.com/O3FhqJ0qFM
— Rishi Sunak (@RishiSunak) May 5, 2020
The health secretary Matt Hancock also told Sky News today: ‘Rishi has said that there won’t be a cliff edge but we also need to get people safely back to work so we can withdraw from that scheme.
‘It has been incredibly successful in keeping firms alive, but we have also got to wean off it.’
Meanwhile, consultations with car dealer workforces have already begun.
Car Dealer Magazine has been sent a series of documents emailed to thousands of staff in different dealer groups warning of impending job cuts.
One dealer group began consulting staff yesterday after a video message was sent to all employees from the CEO.
‘We must start to consider when that [furlough] comes to an end, regrettably, we think the prolonged impact to the business will be a downturn by as much as 25 per cent, therefore it is necessary to plan for a corresponding reduction in employee roles,’ said the chief executive in the video message.
Car Dealer Magazine has chosen not to name the group, which is one of the top 25 in the UK, so as to not adversely affect its relationship with suppliers and manufacturers, which it needs to continue business during this difficult time.
The whole company has been included in the group’s consultation process, putting all staff at risk, and the chief executive says the timing was to allow for the 45-days required by law so it can be concluded by the end of June.
Car Dealer has been leaked documents from four other dealer groups that are undertaking similar processes with their staff.
Accountant David Kendrick, a partner at UHY Hacker Young, said staff costs are the biggest outgoing for dealers and job losses are highly likely.
He said: ‘Some of the losses these businesses may incur when reopening takes place could be significant and unfortunately staff wages are one of the largest costs the businesses carry. Redundancies are inevitable I am afraid to say.’
Employment lawyer Kiril Moskovchuk from Lawgisitics agreed. He said: ‘With the economy to a large extent comatose and on life support, many dealers do not anticipate a speedy recovery.
‘They will be looking to overhaul their business model in line with the anticipated low demand. Sadly, redundancies look inevitable.’
Sharron Spall, director at WeRecruit Auto said although it’s a tough time for dealers they need to remember finding talented sales people isn’t easy.
She said: ‘I think it’s a risky time for an industry which, in recent months, has struggled to retain talent.
‘Groups are likely to have to make some difficult decisions in order to survive, but should also carefully consider the long-term consequences, including considering whether they can adapt further before cutting staff.’
Moskovchuk said the consultation periods announced so far were expected as many dealers look towards the end of the furlough scheme in June.
The chancellor’s announcement today may soften that blow, but whichever way it’s looked at, car dealer businesses have changed dramatically and job cuts are likely.
Moskovchuk added: ‘Consultations with a view to minimise the potential job losses and to keep the employees informed are an integral part of the redundancy procedure.
‘Consultation may still be carried out with the staff on furlough and the affected staff will likely get a notice that their job will be terminated when the furlough scheme ends.
‘Making an employee redundant before the furlough scheme ends may be open to a legal challenge as the cost of employment is greatly subsidised by the government.’
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