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Furlough must be extended to avoid mass redundancies, businesses warn

London business leaders have called for an “urgent“ extension of the furlough safety net beyond the end of May to avoid a huge wave of permanent job losses in the summer.

They warn that employment law requiring up to 45 days’ consultation on redundancy programmes means struggling companies will start to “press the button” on staff cuts from today.

In a letter seen by the Standard from the head of the London Chambers of Commerce and Industry to member companies, chief executive Richard Burge said he was seeking “urgent clarity from the Government about the furlough scheme beyond May 31”.

He warned that without a pledge to extend it into the summer, “I fear many businesses will feel they have to turn to redundancy consultation sooner rather than later”.

The furlough scheme, announced last month, allows employers to suspend staff they do not need but reclaim 80 per cent of their salary up to a maximum of £2,500 a month from the Government.

However, businesses say they will have to make tough decision soon about staffing levels after the furlough safety net is removed.

Under the Trades Union and Labour Relations Consolidations Act 1992 redundancy programmes involving more than 100 employees require 45 days’ consultation, while those for more than 20 but fewer than 100 need 30 days.

Michael Lassman, London chairman of the Federation of Small Businesses, said many of its members were worried about cash-flow crunches after the furlough protection is removed and were close to making tough decisions on levels of staffing.

“We are talking about two weeks,” he said.

Wendy Harpur, HR director at north London accountancy firm BKL, said she was advising companies thinking of redundancy programmes to start consultation as early as possible so that they get the process right. The penalties for botching a redundancy process can be up to 90 days’ pay per person.

Des Gunewardena, chief executive of the D&D London fine dining group, said: “What we’re seeing in places in China, Hong Kong and South Korea suggests we are extremely unlikely to have a sharp V-shaped recovery. We have to plan for trade being 30 to 40 per cent down in the early stages of the recovery. And that points to some fairly substantial redundancies without further financial support. We have to face the potential of major job losses coming out of furlough.”

Jim Harra, chief executive of HMRC, today said he expected the website for making furlough claims to be up and running by next Monday, with the first payments made by the end of the month.

He told BBC Radio 4’s Today programme he expected Chancellor Rishi Sunak would extend the scheme if needed, adding: “I’m sure that is something he is monitoring and keeping under review.”