Furlough was introduced at the start of the pandemic to help support businesses and workers affected by Covid-19. The scheme sees the government pay 80% of employees’ wages for the hours they cannot work during the pandemic.
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However, despite the scheme being extended until the end of September 2021, we are already starting to see the number of employees on furlough dropping.
Good news right? Not necessarily. We take a look at what the end of furlough really means and what happens next.
Furlough figures fall by half a million
According to the latest government figures, the number of people on furlough fell by half a million in March. This is down from 4.7 million in February.
As business owners have begun to open their doors again, we’ve seen people who work in shops, beauty salons, gyms and restaurants start to return to work. And as more and more restrictions are lifted, the numbers on furlough will continue to fall.
It is worth taking a look at the groups that have been impacted most by the pandemic. Sarah Coles, personal finance analyst at Hargreaves Lansdown, says that it is 18-24-year-olds and the over 65s that are most likely to be on furlough.
Coles explains, “Older people returning to work will be particularly relieved because according to the ONS, a third of this group think their chances of having a job to go back to after all of this is over are about 50:50.”
The state of play
While employees are starting to come off the furlough scheme, it’s still going to stick around for a bit longer.
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As Sarah Coles highlights, “If you’re still on furlough, you have the comfort of knowing that the scheme continues through the summer, and the government will offer 80% of pay until the end of June, before it starts to taper. There’s still a good chance the economy will reopen sufficiently to protect your job before support starts to fall.”
However, while some employees are coming off the scheme and returning to work, others are being made redundant. Some companies have had to cut staff numbers in order to adapt to the new business conditions.
Thankfully, there is some good news as the UK economy is showing signs of a strong recovery. GDP is forecast to grow by 7.8% in 2021. In addition, data produced by Adzuna for the ONS shows that the number of job adverts finally rose above pre-pandemic levels in the third week of April.
If you are currently on furlough, or about to come off the scheme, and concerned about your finances, then there are some things that you can do to help your situation.
Firstly, think about undertaking a budgeting exercise. Consider the three possible scenarios, where you:
- Stay on furlough
- Go back to work
- Are made redundant
If you can estimate your income in each of those situations, then you can set your monthly budget more effectively.
Secondly, if you are currently on furlough and are able to save, then it could be a good idea to build up your emergency cash fund. A good rule of thumb is to have around three months’ salary saved in an instant access account. That way, if you are made redundant, you have a solid financial cushion.
Finally, have a serious look at your debt situation. If you have expensive credit card debt, now is probably the time to try to reduce it. If you are unable to pay this off instantly, then maybe look at getting a 0% balance transfer card. While these cards typically have a transfer fee, they often offer an interest-free period in which to pay off your credit card balance. This will significantly cut the cost of your interest payments.
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