Furlough horror warning: Return of scheme could cost £1.4bn as Omicron rages

John Swinney addresses Omicron support for businesses

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The Resolution Foundation is making the calls as data begins to emerge on the threat posed to businesses by increased Covid restrictions and loss of confidence among the public. According to the group, restaurant numbers are down around a tenth with Christmas parties being cancelled despite the Government having explicitly encouraged them. Speaking at an event this morning Research Director at the Resolution Foundation James Smith said demand would fall for hospitality in particular as cases rise, due to more people self-isolating and consumer confidence taking a knock. The think tank estimates as many as 20 million people being infected during this wave meaning well over a million could be isolating at any one time.

Although businesses have not yet been forced to close many have argued the current conditions will increasingly amount to that, with the Night Time Industries Association describing it as a “pseudo lockdown”.

Even a targeted furlough would come at significant cost.

In the early 2021 lockdown the UK saw 1.5 million hospitality and leisure workers on furlough.

If that was repeated with workers continuing to received 80 percent of previous earnings the Resolution Foundation expect a cost of around £1.4bn a month.

To date, furlough has cost the country £46bn.

The Resolution Foundation believes the support will not be required for as long though with the speed of the booster programme and high case rates meaning the current wave should in theory be much shorter.

They suggest it may be enough for furlough to just run for January and February.

Yesterday the International Monetary Fund also suggested a return of furlough should be considered.

In a report on the health of the UK economy, the UN agency said the Government should “redeploy” the most successful steps taken to protect businesses during previous Covid waves – if mandated closures are enforced.

In particular, it suggested “a furlough scheme and targeted support to the most vulnerable households and small businesses”.

Speaking at this morning’s event chief executive of Citizens Advice Clare Moriarty said we “absolutely needed support” targeted at people who need it.

The Resolution Foundation is particularly concerned about the impact on lower income workers in the absence of previous support measures arguing: “Employees laid off will receive far less help now than they would have done in previous waves with the furlough scheme unavailable and out-of-work benefits less generous following the removal of the £20 a week uplift to Universal Credit (UC).

“A single earner on £15,000 who loses their job will see their income fall to 30 percent of what they are used to, compared to 40 percent if they’d lost their job in an earlier wave or over 80 percent if they’d be furloughed.”

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It comes with a warning huge income falls will also come at the same time as a major cost of living crunch.

This morning inflation was revealed to have soared to 5.1 percent, far beyond the Bank of England’s two percent target.

In yesterday’s report the IMF also shot warning to the central bank, cautioning it to avoid “inaction bias”.

The Bank is due to make its next decision on interest rates tomorrow against a backdrop of rising inflation but great uncertainty over the economic harm Covid might cause.

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