The Coronavirus Job Retention Scheme has come to an end. More commonly known simply as ‘furlough’, it has helped pay wages for more than eleven and a half million people since Covid-19 first landed.
But what might be the knock-on effects of furlough ending, and will they be felt in the private rented sector?
How many people are still on furlough?
When the scheme closed at the end of September, there were still around a million people getting some level of support. While most people are back at work now, some sectors (the travel industry, for example) are still struggling to recover from the effects of the pandemic, and many firms have been relying on furlough to keep their staff employed.
Changes to furlough earlier in the year began to taper down the amount of support offered, with employers (and the employees themselves) having to make their own contributions. This means that what the scheme has really been doing in more recent months is to ‘top up’ wages for part-time workers whose jobs haven’t yet gone back up to full-time again.
What effects might the end of furlough have on people’s finances?
Commentators are suggesting that we’ll see a small but noticeable rise in job losses as furlough ends. It was only ever supposed to help people retain ‘viable’ jobs in industries that would recover as the pandemic eased off, but in practice it’s allowed companies to keep more of their former staff on in part-time roles, rather than condensing the jobs down into a smaller number of full-time positions.
Now, of course, employers will be paying full whack for part-time staff, and if business isn’t brisk enough to bump up their hours then it probably won’t be financially viable to maintain this. Employees may need to settle for part-time wages, or they may have to take redundancy.
Fortunately, the UK isn’t short of jobs at the moment, but it’s not always as simple as just switching across. Retraining takes time, and the jobs available may be lower-paid or unsuitable. For example, someone who’s spent 20 years working for an airline may not wish to take a job in an abattoir.
All of which means that some people may see their income take a hit over the next month or two.
Will the private rented sector see knock-on effects?
Inevitably, there’s the possibility that a tenant with financial worries may have trouble paying their rent, but in the case of furlough, the risk is relatively low. Despite talk in the media of a ‘cliff edge’, the gradual reduction of support and the long period of notice has given both employers and employees a decent amount of time to come up with a plan.
Having said that, individual circumstances vary and some tenants may still struggle – especially those who were already in arrears. As ever, communication between landlords and tenants will be key
What other developments might affect the sector this month?
In some ways, a more significant development this month is the £20 a week cut to Universal Credit. Like the furlough scheme, the temporary boost to Universal Credit payments was a measure to help support people during the pandemic, but where furlough was geared towards those in more secure jobs, Universal Credit has been a lifeline to those in much more precarious situations – including those who lost their jobs during the pandemic rather than holding onto them through the job retention scheme.
People on Universal Credit may already be in arrears with their rent, and single people under 25 will be particularly hard-hit because they get the lowest level of benefit payment to start with. The government has argued that the £20 uplift was only ever designed to be a temporary measure, but that doesn’t mean those in straitened financial circumstances won’t miss it when it’s gone.
Charities and industry bodies have both warned that the combination of the end of furlough and the drop in Universal Credit may see the situation becoming more desperate for those already in arrears, and have called for interest-free loans to be provided for those who are struggling to pay their rent due to the effects of the pandemic.