Cancellation of Job Retention Bonus could spell the end for many businesses
Many West Midlands businesses may face problems with their income forecasts following the extension of the furloughing scheme.
Thousands across the UK have already factored in the £1,000 per employee Job Retention Bonus, which was due to be paid for each formerly furloughed employee still in employment in January.
Johnathan Dudley, head of manufacturing at national audit, tax, advisory and risk firm Crowe, said: “While we were still welcoming the Chancellor’s decision to extend the furlough scheme to March 2021, in the small print there was a firework ready to go off.
“Many businesses have been including significant sums from the JRB in their income forecasts.
“If you furloughed 250 employees and brought them back, you were due £250,000 by way of the bonus, for example, and many businesses have already factored in significant sums in their cashflow forecasts and in applications made for CBILS loans.
“Given that these loans are guaranteed by the Government, this firework may backfire on the Government."
Mr Dudley, who is based at the Midlands office of Crowe in Oldbury, said he also believed that this may have adverse impacts on behaviour with businesses closing down for a few weeks, perhaps over Christmas, and furloughing staff in order to obtain a grant in a similar sum.
“If this behaviour has an adverse impact on productivity, there could be far reaching implications on the supply chain of goods and services and ultimately a further hit to the economy, and therefore treasury purse.
“Swift action is required to remedy this oversight, otherwise a huge amount of unintentional damage could be caused to businesses that are already struggling to cope financially, and may have already made agreements on loans, debts and items like rent on the promise from the government that they were to receive £1,000 per employee via the Job Retention Bonus in their February 2021 cashflow.
“The Government needs to put this right in days, not weeks, so that businesses that are just surviving can understand their true position.”
He said in the meantime businesses should consider making a further application for CBILS.
