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Industry 'cannot afford' to contribute to furlough scheme

The fashion retail industry has warned that job cuts could be on the horizon as many businesses are unlikely to be able to afford to contribute to a shared furlough scheme. 

Chancellor Rishi Sunak yesterday extended the government’s Job Retention Scheme for a further four months. Employees on the scheme will continue to be entitled to 80% salary payment up to a limit of £2,500 a month until October. 

However, from August employers will be asked to start sharing salary costs with the government. During this time, employers will be able to bring furloughed employees back part time. Full details of the new flexible measures will be announced by the end of May.

Although the industry has welcomed an extension to the scheme, many said the plans for August onwards are concerning.

“I think the furlough scheme is great, and it is fantastic it has been extended”, the chief executive of one high street womenswear retailer said. “However, what is not clear is how much businesses will have to pay up themselves. The announcement was vague.”

He warned that not many businesses will be able to contribute: “I don’t think many companies will be able to afford to keep all of their staff if they’re having to pay towards the furlough scheme. It might make businesses rethink their requirements and will, therefore, likely see a stripping back of staff, unfortunately.”

Simon Carter, founder and owner of the eponymous British menswear business, agreed: “I do not feel that most in the industry will be able to afford to top up 20 or 40% of their staff by then.”

One headhunter told Drapers: “Employees’ roles are certainly still at risk, despite the furlough extension. A few companies I know are already looking at redundancies, but they will just be hanging on until they get more details.”  

One independent retailer in the East Midlands suggested: “There should be a hybrid, as people will either be made redundant or they will have reduced hours. I also think we should get redundancy relief.” 

More than 7.5 million jobs have been furloughed across the UK. The scheme went live on 20 April, with payments backdated to 1 March.

Carter predicted that the furloughing scheme will likely have wound down for the fashion industry before October: “I have a feeling that the October extension is aimed those sectors that will be last to open, such as cinemas and theatres. My own opinion is that there will come a point where, if a sector is allowed to open, then the government will wind down its furlough scheme relevant to that sector.

“I can see an argument that says ’If we allow you to open, and you choose not to, after a certain period of time to adjust, then it’s your decision and the state should not be paying for your furloughed staff’.”

A head office employee at one high street retailer agreed that the industry will need to fully reopen before October: “I think it is good that the furloughing scheme has been extended, but it is concerning that businesses might not go back to normal until that time – at least. 

“For fashion especially, given people are shopping online, it might just mean businesses continue to do that instead of opening retail operations. It makes you wonder whether those in bricks-and-mortar roles will have a job after October.”

However, the owner of one high street fashion business said it could mean more staff are saved: “Realistically, if employers are having to pay to furlough staff, then they will all have to start working again, even if only part time. I think it is fair that employers will have to start contributing, as it will gradually get the economy moving again and force businesses to open up sooner.”

Jodie Howell, founder and managing director of JJH Talent & Recruitment Outsourcing, agreed that it will help get the fashion industry up and running again: “I certainly think it’s a step in the right direction if it is there to support businesses helping staff get back to work – even at part-time hours for the short term. We need to get the wheels of the industry moving again.”

Readers' comments (2)

  • Retail needed to lose jobs on all levels before COVID-19 and the lockdown occurred. It has highlighted how exposed retail is, with too much money going out and not enough coming the other way.

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  • This is a really tough time for retail, I feel that we are seeing 10years change in 10weeks, unfortunately many of these changes were going to happen over time anyway. Even if the Government supports furlough until the end of the year, its inevitable that jobs will be lost.
    You only have to view the news on Arcadia, monsoon, New Look, Clarks etc that was pre-Covid to see what is going to happen.

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