In the second of this three part video series, financial journalist James Ashton talks with Chris Newell, a managing director in our restructuring and insolvency team about what happens to jobs that will no longer exist after the government furlough scheme ends in September.
The video and a transcript of the interview can be viewed below.
The end of furlough & the job market conundrum
James Ashton: Chris, the data tells us that there are a huge number of people on furlough in jobs that probably don't exist anymore. How will the situation unravel itself do you think?
Chris Newell: I think that's correct. There's a core of people that are still on furlough, running into the millions and many of those are in the leisure, hospitality, retail sectors and the furlough is going to end and sort of taper down towards the end of September. So, once that falls away, I think we're really going to see the truth and unfortunately there's going to be a number of jobs that no longer exist, and there's going to be climate of redundancies at that time.
James Ashton: And it's quite strange isn't it, you might call it a jobs riddle...we have all of these people still on furlough but a lot of bosses now, particularly in hospitality and leisure sectors saying I need to ramp up my business, I need to get trading again, but I can't hire.
Chris Newell: Yes, it's an absolutely fascinating situation. So, the leisure and retail industries have opened up and there's a requirement for them to recruit and they've really struggled to recruit. It doesn't quite marry up with what's happening with the furlough, with the millions that are still on the furlough scheme, where there's jobs there but they won't come across to the retail and leisure sectors. I don't think that it's going to unwind properly until the furlough scheme ends and that will force people to take these jobs, where there's the availability in these sectors that we're talking about.
I think quite interestingly what we're hearing is that a number of people that are on furlough have taken second jobs, and they're either earning more money doing these jobs or have greater security and so I think that it's going to take the end of furlough to flush this out, and then recalibrate the jobs market.
James Ashton: So, what would your advice be if you're the CEO of a company? You probably know that you've got to reduce head count, furlough will taper off to September. Do you make those decisions now or do you wait and see a few months down the line?
Chris Newell: You've got to make the decisions now and early. The furlough scheme is going to end at the end of September. We don't believe that it's going to be extended due to the success of the vaccine rollout, so really what business owners need to do is take advice from their current advisors or Quantuma, and then look at what their cashflow forecasts predict on a variety of different bases. If they need to make redundancies, there's a cost to making those redundancies and they might need to make those redundancies earlier rather than later.
James Ashton: I guess the added complexity for some of these companies - they are in hospitality, they're in leisure, they're going to trade through summer and how well they do sometimes depends on simply if the sun is shining or not?
Chris Newell: Yes indeed. Many have seasonal business models and they'll have a busy period throughout the summer, and so what they need to do is understand that it is seasonal and that there will be a spike throughout the summer, but they need to plan throughout the winter and getting through as well. So, their models need to accurately forecast what's going to happen on a variety of different kind of scenarios, and they need to be taking advice...and for those businesses that are seasonal in the summer and are having the spike right now, they need to make sure that they take the decisions and advice now, so they can build their financial fortitude through to the winter months, which would be leaner.
James Ashton: Chris, thanks very much.
Chris Newell: Thank you James.
Originally Published 16 June 2021
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