One in seven small firms expecting redundancies as economy reopens after lockdown

As non-essential shops and outdoor hospitality in England reopen after three months in lockdown, new figures show that almost two-thirds of small businesses expect performance to improve this quarter – but one in seven expects to lay off some or all of their staff.

The Federation of Small Businesses branded the expected redundancies “worrying” and called on the government for steps to shore up employment and protect against a “job market shock” as the furlough scheme begins to be wound down in July and ends in September.

Meanwhile, the TUC warned that Britain risks seeing coronavirus cases “spiral out of control” unless workplaces are kept Covid-secure as the economy reopens.

Step two of Boris Johnson’s roadmap out of lockdown on 12 April will see the reopening of non-essential shops as well as hairdressers, nail salons, libraries, community centres, zoos, theme parks, drive-in cinemas and self-contained accommodation such as campsites and holiday cottages. 

Pubs and restaurants will be allowed to offer outdoor table service, and indoor leisure facilities such as gyms will also reopen for use by people on their own or in household groups.

Reflecting the partial return to normality, the FSB’s quarterly Small Business Index recorded its strongest level of business confidence since 2014.

In a survey of almost 1,700 small business owners, some 58 per cent expected performance to improve over the coming three months, while fewer than one in three (31 per cent) believed it will worsen. A majority (53 per cent) said they were hoping to grow their firms over the next 12 months.

But one in seven (14 per cent) of small firms with staff said they are likely to make some or all of them redundant in the April-June quarter.

The Coronavirus Job Retention Scheme will continue to pay 80 per cent of wages for furloughed staff up to £2,500 a month until the end of June, with the sum contributed by the state falling to 70 per cent in July and 60 per cent in August before halting altogether at the end of September.

FSB national chairman Mike Cherry said: “It’s worrying to see such a sizeable proportion of employers fearing redundancies over the coming months. Initiatives like Kickstart, as well as incentives to take on apprentices and trainees, need to be delivered efficiently over the coming months to protect against a job market shock and support the young people that have disproportionately borne the brunt of rising unemployment.  

“Policymakers also need to look at measures to encourage hiring activity. Bringing down the non-wage costs of employment, starting with employer national insurance contributions, which essentially serve as a jobs tax, would certainly help.”

Mr Cherry said it was “fantastic” that so many businesses were able to reopen in England as the third coronavirus lockdown eases further.

“The certainty provided by the government’s roadmap is filling many small business owners with renewed confidence,” he said. “We live in hope that the virus stays in retreat so the remaining indicative dates for unlocking can be met, enabling our vital night-time economies, offices and travel and tourism businesses to get back to it as well.”

TUC general secretary Frances O’Grady said: “As we reopen the economy, we must not drop our guard on workplace safety. If workplaces aren’t Covid-secure, coronavirus cases could spiral out of control again.

“Ministers must tell the Health and Safety Executive to crack down on bad bosses who play fast and loose with workers’ safety. It’s a national scandal that not a single employer has been prosecuted and fined for putting workers or the public at risk.

“Vaccinations can’t be a substitute for comprehensive health and safety measures to make workplaces safe.

“And the government needs to wake up to the fact that a lack of decent sick pay undermines [a] safe return to work. Ministers must raise statutory sick pay to the level of the Real Living Wage, and make sure everyone can get it.”

A government spokesperson said: “Throughout the pandemic, we have protected people’s jobs and livelihoods through an unprecedented £350 billion support package for businesses.

“This includes paying the wages of over 11 million people through the furlough scheme, which has been extended until the end of September.”