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Car dealers’ lockdown financial burden may grow with furlough cuts

Chancellor Rishi Sunak

Car retail businesses who promised to exceed the 80% salary funding cap of the Government’s Coronavirus Job Retention Scheme (CJRS) will face an increased financial burden if support is cut to 60%.

The Chancellor of the Exchequer, Rishi Sunak, is expected to extend the CRJS scheme to September in a live press conference this afternoon (May 12).

He is also expected to cut Government's salary contribution through the scheme to a maximum of 60% of an employee's monthly salary – with a corresponding cap on maximum grant funding from the current £2,500 per month.

The changes will pile pressure on generous car retail businesses which had vowed to pay staff more than the CRJS’s 80% grant contribution to its wage bill in order to mitigate the impact of the COVID-19 lockdown period on their employees.

But few will be able to reintroduce large swathes of staff back into businesses which look likely to remain closed until June 1 at the earliest under the ongoing Government-imposed lockdown as detailed in the 50-page ‘COVID-19 Recovery Strategy’ document published yesterday (May 11).

Last week Sunak took to Twitter to promise that there will not be a ‘cliff edge’ ending to the Government’s CJRS scheme.

However, he conceded that “some scenarios show we are potentially spending as much on the furlough scheme as we do on the NHS”, adding: “I am working out the most effective way to ease people back into work.”

Government is currently paying the wages of 6.3million UK workers under its CJRS furlough scheme at a monthly cost of £8bn. By comparison, the monthly NHS budget is £11bn.

AM reported last week that many car retailers consider the financial balance of returning furloughed staff to work as the "biggest challenge" posed by the COVID-19 crisis.

Clive Brook group managing director, Clive Brook, said returning staff to the business’ payroll during the period of low demand posed “the biggest risk to the business so far”.

Vertu Motors chief executive, Robert Forrester, meanwhile, said that “a very measured approach” was required to ensure that his businesses resources could be backed by demand.

Brook said: “It’s fairly obvious. When you bring someone back you have to have the income to justify their place in the business. It’s a fine financial balance to strike.

“Without doubt, managing the return to work will be the biggest challenge, financially, for the automotive retail sector.”

Forrester said: “You are forgoing that Government support when you bring staff back but we have a business to run and we have a lot of customers.

“We have a very measured and controlled approach where we consider our available resources.”

Cambria Automobiles chief executive Mark Lavery has already conceded that “over 100 redundancies” are possible within his car retail group when the Government's coronavirus job retention scheme’s (CJRS) furlough period ends.

Speaking to AM following publication of an interim results statement for the six-month period to February 29, he said: “We don’t yet know whether what we are facing is a recession or a depression.”

“If (the Chancellor of the Exchequer, Rishi Sunak) doesn’t extend the scheme beyond that point then we will have to start planning. There is a possibility of over 100 redundancies.”

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