A cliff-edge ending to the government’s furlough scheme would result in mass redundancies across the sector.
Experts have warned that if the government fails to implement a tapered end to the furlough scheme thousands could lose their jobs.
With two thirds of businesses across the country with some proportion of their staff on the job retention scheme – or furlough – confirmation of an eased reintroduction is desperately needed.
Mike Jones, chairman of ASE Global, said: ‘The government needs to ensure that there isn’t a cliff-edge end to either the lockdown or the furlough scheme.
‘If the scheme were to end on June 30 then this would result in mass redundancies in the sector, even if the lockdown has been lifted.’
Car dealers and manufacturers are predicting a possible early surge in demand for new and used cars when the lockdown is lifted – but most admit that is unlikely to last.
With many industries across the UK, from airlines to travel and hospitality, facing redundancies, a weakening in consumer confidence will undoubtedly hit the car market.
John O’Hanlon, CEO of Waylands Automotive, which runs four Volvo dealers, said he believed such an ending would be useful.
He told Car Dealer Magazine: ‘If we could do a partial furlough to help us through the initial stage that would be incredibly helpful.
‘If it was based on the amount the government funds that would be the simple and easy way.
‘If the government allowed us to move to a percentage that they funded, maybe not at 80 per cent, so there is some relief to the taxpayer, that would allow us to maintain a level.
‘Our people feel like family so it would be great if we could still retain them and pay them at a level that allows us to be a little bit more patient.’
Marshall Motor Group CEO Daksh Gupta agreed, adding: ‘A tapered end to the furlough scheme whereby the government pays a reduced percentage of staff’s wages would certainly help ease the pressure on dealers when they are returning to work.’
David Kendrick, partner in accountancy firm UHY Hacker Young, told Car Dealer that when the lockdown lifts ‘it is unlikely sales will be straight back to 100 per cent’.
‘Also, with social distancing in place there may be less ramps that can be worked on in workshops, therefore I think the government needs to allow the furlough scheme to be in place in some capacity for the medium term to avoid redundancies,’ he told Car Dealer.
‘If this was on a gradual basis then business owners could bring back the correct level of staff based on demand and it also protects employment.’
Kendrick thinks that during May and June further announcements will be made.
ASE Global’s Jones expects there to be a tapered end to the scheme that would allow the car industry to get back up to speed.
He added: ‘Practically it will take considerable time before we have a requirement for all of the sales staff we have currently furloughed, given the expected levels of demand.
‘And that is assuming we can physically accommodate everyone at a social distance from each other at that time.
‘If the government stops making the furlough payments, then businesses will have to reluctantly react accordingly and let people go until the economy recovers, which is a solution the whole furlough scheme is in place to avoid.’
Kendrick’s colleague at UHY Hacker Young, Paul Daly, was more pessimistic and thinks it could be difficult to introduce such a tapering.
He said: ‘The practicalities of such a system may prove too difficult to implement and would be open to abuse.
‘My view is that furlough is likely to be extended further, perhaps by one or two months, but then businesses will need to stand on their own feet and they should plan their resources accordingly.’
Kiril Moskovchuk, an employment specialist at Lawgistics said it’s not a case of if redundancies will be made, it is how many.
He said: ‘The furlough scheme has already been extended to the end of June, and it will certainly help to avoid at least some redundancies if the scheme is extended further, even on less generous terms. It is not a question of if the redundancies will follow, it is a matter of scale.’
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