Britain’s Economy is Burning whilst 3.2 million Employees are on Enforced Holiday.

Britain’s Economy is Burning whilst 3.2 million Employees are on Enforced Holiday.

WWII was the last time Britain faced the level of adversity we face today. Then everyone was asked to pull their weight. Women entered the workforce in droves, Dig for Victory campaigns got everyone growing food in their gardens and public spaces. Even the lawns around the Tower of London became vegetable patches. Through the catastrophe of war, innovation and productivity became necessities of survival, they also gave rise to the Britain of today. Have these key ingredients of our success been forgotten? 

The UK is at war against Covid-19, we are fighting a global pandemic. We need everyone to work together to reduce the loss of human life and economic impact. It should be ‘all hands on deck’ just like in WWII. The UK Govt has stepped in with a number of financial support packages, but they have also inadvertently sent over 3.2 million of our able workers on holiday, just when we need them most. This is the unintended consequence of the current Furlough Scheme rules, a simple change could fix this overnight – let Furloughed workers work for their employers. 

Other countries are doing things differently. In New Zealand, a wage subsidy rather than a Furlough Scheme was implemented. Businesses have to show their revenues have been hit by 30% to claim, but then it’s up to them how they manage their staff. Businesses choose who to leave sunning themselves in their gardens, and who they need in the day to day trenches, or who is tasked with projects to future proof the business. The reality is the UK Govt is already paying out billions for the Furlough Scheme. Turning this from a sunk cost into an investment of human capital into our businesses, will deliver a better outcome for the British Economy of tomorrow.

The UK Govt Furlough Scheme was designed to reduce the likelihood of workers being laid off.  If the government covers a proportion of staff wages, more employees will remain connected to their employers, with a greater chance of keeping their jobs. However, once Furloughed, an employee is prohibited from providing services or generating revenue for their employer. In other words they cannot work for their employer. Sadly, these rules are working against small businesses, as they try to navigate this crisis. 

In February, Volcano Coffee Works experienced its best February on record. This was in line with our strong annual growth of 30%+ year on year. Three weeks later over 90% of our customers (cafes, restaurants, hotels and corporate office clients) were closed. The business faced a stark choice. Furlough two thirds of the team and reduce the hours (and cost) of a skeleton crew, or risk going out of business.  We acted fast. Now having experienced the current furloughed staff rules for 4 weeks, it is clear lifting the restrictions on Furloughed employees, would solve three critical issues: 

1)   Businesses would still have the right people doing the right jobs. The reality of a reduced team is that there is no choice but for staff to do tasks that would be better done by someone on Furlough. 

2)   Businesses would be better prepared to maximise their recovery. Small businesses always have a list of projects that need doing, things like designing that streamlined operating model, updating the CRM system, or researching new export opportunities. A huge opportunity cost of the furlough rules is businesses can’t invest in innovating themselves, making themselves fitter, faster, stronger to come out of this in a more robust state. For example, our Head of Production is working on our packing line, his time would be better spent innovating our production processes. 

3)   All employees would remain engaged, connected and ready to commence full-time work once the economy starts to recover. Right now, there is a real risk that Furloughed employees are losing their ‘work fitness’ - their skills may be slipping, they are getting out of the habit of day to day employment. Anyone who has taken a career break knows that it takes time to get back into the swing of work.  

In terms of usual new policy timeframes, the UK Govt has implemented support schemes at break-neck speed. A cost of speed is that the unintended consequences can’t all be identified or mitigated upfront. We face this every day in small business, we often don’t have the luxury of time to ‘bottom out’ all our thinking before decisions must be made.  That’s ok, provided you are also prepared to re-visit and make changes once new information arises. 

Funding employee wages is a huge support for business. But much more would be achieved if the UK Govt implemented changes to the rules enabling everyone to contribute to our economic recovery.  These changes would particularly help small businesses and their workforce, putting them in a stronger position to drive the economy forward, once Covid-19 is behind us. 
 

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