UK should be ready to bring back a form of furlough, says IMF

Businesses should prepare for potential reintroduction of the scheme if support is needed following the recent surge in Omicron cases, experts warn

Following warnings of a ‘tidal wave’ of Omicron cases in the UK over the last week, an international organisation has said that a form of furlough may need to be reintroduced if business closures are required.

The International Monetary Fund (IMF) warned that the UK government should be prepared to “redeploy… the most successful previous exceptional programmes”, including a version of the furlough scheme and other business support packages, in the event that another wave of the virus leads to further lockdown measures.

Any support needed to be “tapered” with a timely end point, the international financial institution said.

“Fiscal policy should retain an important role in responding to large shocks,” said the IMF’s managing director Kristalina Georgieva of the UK’s response to the pandemic.

“In the event of new widespread mandated closures for health reasons, there is now a playbook to be reused. It could also have a role in responding to present supply-demand imbalances,” she said.

Responding to the statement, Jonathan Boys, labour market economist at the CIPD, said that the government has not yet communicated what support, if any, would be provided in the event of further restrictions.

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But, he said: “If support is given, we can assume it will be another iteration of furlough”, adding that the original scheme was designed to be implemented quickly through existing infrastructure, so it limits the need for advanced preparation.

Government scientists lifted the UK Covid alert level to 4 on a 5-point scale over the weekend and, in an address to the public, the prime minister warned a “tidal wave of Omicron is coming” before announcing the reintroduction of Covid measures including an emergency vaccination booster programme. 

Separately, the Resolution Foundation today released a briefing from chief executive Torsten Bell and senior economist Jack Leslie which said targeted furlough made available to firms hit hard by the latest wave would be the “best way” to support household living standards through a difficult winter. 

“We have an existing scheme (the Coronavirus Job Retention Scheme) that can easily be brought back into use quickly,” the authors said, adding that claims sectoral targeting would be difficult are “overdone” and noting that targeted grants were used throughout 2021.

The think tank warned that employees laid off now would also receive far less help than they would have done in previous waves, with both the furlough scheme now unavailable and the removal of the £20 a week uplift to Universal Credit. 

“A single earner on £15,000 who loses their job will see their income fall to 30 per cent of what they are used to, compared to 40 per cent if they’d lost their job in an earlier wave or over 80 per cent if they’d be furloughed,” Bell and Leslie wrote. 

Despite hopes that there will be no need for another lockdown or forced closures to businesses, Gemma Dale, lecturer at Liverpool John Moores University, warned that with the spread of Omicron meant HR needed to be preparing now for this eventuality.  

“As we know from our experiences in 2020, any scheme is likely to be introduced at speed and with little preparation time,” she said, suggesting that HR should work on the basis that the scheme would likely be similar to those previously in operation.  

“Although many HR professionals will no doubt be looking forward to a break over the festive period, they may also wish to think about establishing a process for keeping in touch over the holidays in order to be able to respond rapidly to a fast-changing situation,” she advised. 

However, Ian Moore, founder of HR consultancy Lodge Court, cautioned against organisations trying to pre-empt future restrictions. “We advise against employers reacting too quickly to news and speculation, particularly when it comes to their employees’ positions,” he said. 

Rather, he told People Management that businesses should instead follow guidance issued from the government and, if the furlough scheme was reintroduced, arrange to meet – either face-to-face or virtually – with the affected employees to discuss the situation.