By Aisling Finn on Wednesday 13 May 2020
The Chancellor yesterday extended the scheme until the end of October 2020 and said no changes would be made until the end of July.
Yesterday afternoon the Chancellor Rishi Sunak laid out several changes to extend the government’s Job Retention Scheme prompting a sigh of relief for many fintech firms nervous about paying furloughed staff in the coming months.
Sunak extended the government furlough support until the end of October and said that there would be no changes until the end of July—leaving wriggle room for the government to reduce the amount of support they dish out in a few months.
The Chancellor also revealed that he planned to ask businesses to make furloughed staff come back to work part-time in an attempt to slowly reopen the economy.
Before the announcement in the House of Commons, it was speculated that Sunak would extend the scheme out until September and cut the government salary guarantee to 60 per cent, although this is still likely come July.
In the speech, Sunak said: “This extension and the changes we are making to the scheme will give flexibility to businesses while protecting the livelihoods of the British people and our future economic prospects.”
The Chancellor also revealed that, currently, 7.5m people from 1m businesses were accessing the government-backed furlough scheme.
Unlike other sectors, fintechs appear to be handling remote working-related challenges well although this does not mean they have not had to reduce their staff numbers to keep their heads above water.
AltFi was able to exclusively reveal that financial consultancy 11:FS had to take cost-cutting measures and furlough dozens of staff, implement a 15 per cent pay cut across the whole company and senior executives taking as much as a 75 per cent pay cut.
Earlier this month AltFi also exclusively revealed that digital challenger Monese was to cut staff numbers and close its offices in Lisbon and Berlin as a result of the coronavirus pandemic.
Monzo’s founder and CEO Tom Blomfield also said he would waive his salary for the year and gave executives at the digital bank a 25 per cent cut as well as furloughing 295 members of staff.
Similarly, Revolut co-founders Vlad Yatsenko and Nikolay Storonsky have also sacrificed their salaries and offered staff a salary swap scheme where they can trade £1 worth of salary for £2 worth of shares.
Starling Bank, meanwhile, was able to u-turn on its decision to furlough 41 members of staff following a reevaluation of its online training processes.
The changes proposed by the Chancellor would mean that businesses, including those mentioned above, using the Job Retention Scheme could keep employees furloughed on 80 per cent pay until at least July.
Furloughed employees could also gradually return to work on a part-time basis according to plans laid out by the Chancellor.
However, it is important to note that the planned restructuring of the furlough scheme only works if there are jobs to return to.
According to the latest figures, accredited lenders have dished out £5.5bn worth of loans to SMEs since March 2020.
Notably, Bounce Back loans, which have a 100 per cent guarantee from the government, have accounted for nearly half of the total lent out to SMEs.
Mike Jackson, director of entrepreneur success for Tech Nation, said: “According to our most recent Tech Nation survey, 38 per cent of companies have furloughed staff, with only 6 per cent having made staff redundant.”
“We, therefore, welcome the Chancellor’s announcement to extend the furlough scheme through until October,” he added.
Despite the earlier mishaps, the Chancellor has ironed out some of the creases in the government-backed schemes on offer, but this next stage of the process will be crucial to ensure employers and employees alike can stay afloat.
Read more: Which fintechs are offering government-backed CBILS, CLBILS or Bounce Back loans?
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