Scottish bakers stand fighting chance with extension of furlough scheme

By Gill Hyslop

- Last updated on GMT

The Scottish bakery industry has been hard hit by the outbreak of coronavirus. Pic: GettyImages/artJazz
The Scottish bakery industry has been hard hit by the outbreak of coronavirus. Pic: GettyImages/artJazz

Related tags Scottish Bakers coronavirus furlough scheme Blick Rothenberg

Scottish Bakers has welcomed the four month extension of the UK government’s furlough scheme, which ought to relieve some pressure for struggling small to medium-sized bakery businesses in Scotland hard hit by the coronavirus outbreak.

According to UK Chancellor Rishi Sunak, the Job Retention Scheme is being extended to October 2020, with no proposed reduction in the level of support for workers on it.

Employees will continue to receive 80% of their monthly wages up to £2,500 with no change until the end of July, but the government will ask companies to ‘start sharing’ the cost of the scheme from August.

New statistics from The Institute for Fiscal Studies revealed that a quarter of the nation’s workforce – around 7.5 million people – are now covered by the scheme, which has cost £14bn a month.

The Chancellor said that, from August, the scheme would continue for all sectors and regions of the country but with greater flexibility to support the transition back to work. Employers currently using the scheme will then be able to bring furloughed employees back part-time.

Sector hard hit

The move has been applauded by Scottish Bakers, the industry association that supports bakers throughout Scotland, as the sector has been hard hit.

The sector employs 12,000 in Scotland but members are reporting that 80% of businesses have furloughed staff with a significant proportion of the sector ceasing to trade altogether.

This means almost half of all bakery shops and all bakery cafes are now closed. Despite being able to access government support, many bakers fear they will be unable to continue trading or remain viable for much longer.

“Today’s announcement by the Chancellor offers a real lifeline to many struggling small and medium sized bakery businesses throughout Scotland,”​ said Scottish Bakers CEO Alasdair Smith.

“The extension will allow businesses to more carefully plan their escape from lockdown and begin to bring back staff in a more measured way over a longer period of time. This will help them build up their capacity as demand for their products begins to recover with greater freedom of movement for our population.

“In these uncertain times, being able to plan as far forward as the end of October is a welcome extra relief for businesses as well as helping to preserve many jobs in the sector that would otherwise have been at risk.”

‘Goldilocks’ challenge

A welcome move, but one that has a huge challenge to get right, according to UK tax and advisory firm Blick Rothenberg.

“[The Chancellor] needs to achieve a ‘Goldilocks’ effect – not too hot, and not too cold​,” said Heather Self, partner at Blick Rothenberg.

“If he provides too much, it will be very expensive and may discourage firms from reopening. If he provides too little thousands of people could lose their jobs.”

She added the Chancellor could not go on paying out billions of pounds indefinitely. The expected costs to the scheme to the end of July are likely to be around £50bn, with the extension at a reduced level to the end of October possibly costing a further £20bn. 

“But there needs to be much more joined up thinking between government and business.

“As the furlough scheme is reduced, the government needs to incentivise business and come up with creative ideas about how business can keep going and retain staff.”

“Enabling part time work is welcome, as it will permit a gradual return to work. But the Chancellor said this would only be available to businesses ‘currently using’ the scheme – it is not clear what the cut-off date will be for businesses still considering whether they need to furlough employees.”

She noted additional support beyond the furlough scheme will be needed, like “loans such as the CBILS scheme, or grants, or incentives such as an increase in the Employment Allowance to encourage employers to maintain their staff levels, or even take on new employees.”

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