More than 270,000 UK jobs are at risk of being lost following the end of the furlough scheme, a new report has revealed.
New analysis from Reg Flag Alert – which has been collecting and measuring the financial data of UK companies since 2004 – shows that 274,720 jobs could go when the Coronavirus Job Retention Scheme (CJRS) ends in September.
Most recent data shows that 26 per cent of the 741,285 companies making claims under the CJRS are showing signs of extremely poor financial performance.
It means 193,721 companies are vulnerable to the risk of going out of business, with 12,600 of these failing within six months of furlough ending – leaving almost 275,000 people unemployed.
Dr Nicola Headlam, incoming head of public sector at Red Flag Alert, said: “A smaller number of businesses, around 5,000, which are registered under the Coronavirus Job Retention scheme are already insolvent or very close to insolvency.
“Realistically, come the end of September, these companies will be in a position where tens of thousands of jobs have already been lost or will disappear very quickly. Sadly, this is the very thin end of the wedge.
“There’s a much larger proportion of companies claiming furlough, which won’t be able to pay 100 per cent of wages after 30 September.
“This will see a wave of cost cutting measures as many try to repair balance sheets and fight for survival and will inevitably lead to company failures and job losses in the six months after the scheme has finished.
“These are struggling businesses saddled with debt and without the cashflow or prospects of sufficient revenue to sustain employment and operation.”
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Dr Headlam added that corporate debt could put the future more than 100,000 companies – which employ in excess of 1.1 million people – at risk.
She said: “103,404 businesses drawing on the Coronavirus Job Retention Scheme are surviving because they have access to cheap credit and Government Covid-19 support.
“These companies have a chance of bouncing back from the pandemic, but they are in a perilous position. They are reliant on flexible and extended repayment terms on their liabilities, which gives them much needed breathing space to continue to trade.
“If interest rates rise or job losses and insolvencies spook the organisations they owe money to, companies may find increasing pressures to settle arrears and debts.
“Such a situation may leave many of these businesses having to shed jobs to reduce overheads and keep their companies afloat.
“This should also act as a warning for businesses which have relaxed payment terms within their supply chain to companies widely using the furlough scheme.”