The start of October marked the end of much of the government’s support given to people and businesses to help them weather the pandemic. So what might this mean for the economy going forward?
The furlough scheme was probably the most far-reaching initiative brought in by the government, as one pillar of its economic measures to help employers and employees get through the pandemic.
At its height, the government paid 80% of the wages of people who couldn’t work, or whose employers could no longer afford to pay them, up to a monthly limit of £2,500. The government also covered employers’ national insurance and pension contributions for a period of time.
More recently, in July 2021 employers were required to pay 10% of salaries, with the government’s contribution falling to 70%.
In August and September, the government’s contribution reduced further, and it now pays 60% and employers pay 20%. From October 1, it stopped altogether.
Almost three million people have moved off furlough since March, but in July there were an estimated 1.1 to 1.6 million still furloughed, so now the scheme has ended there is likely to be a significant impact on employers’ wage bills.
It might also mean a large number of people coming back into the labour market.
On the one hand, this is at a time when there are record numbers of vacancies. According to the Office for National Statistics, there were an estimated 1,034,000 vacancies between June and August this year.
On the other, the vacancies are not spread evenly across the economy. Some sectors – such as hospitality, construction, or lorry driving – are suffering from labour shortages. Other sectors are well staffed. It is no means a certainty, therefore, that those coming off furlough, who may be facing redundancy, will easily walk into a new job.
The end of furlough could be a timebomb for unemployment, but only time will tell.
While furlough created certainty for employees knowing their income was protected, for employers the story was a little different. A number of employers found some employees were reluctant to move jobs, through fear that, if the pandemic worsened, they would not fall under the furlough rules and could risk being out of a job. So, it is hopeful that the end of furlough will bring a more fluid market for employees.
This also came to an end on October 1. While the holiday was in place – with a nil rate band for Stamp Duty Land Tax (SDLT) on property sales up to £500,000 – there was a flurry of activity in the housing market, particularly from buyers seeking to complete their purchase before the June 30 deadline, after which the nil rate band rose to £250,000.
Now we are in October, it has returned to the standard amount of £125,000. What might this mean for the housing market? Will it now flatten off?
One area of government support that remains partially in place is the reduced rate of VAT for hospitality, holiday accommodation and some attractions.
The rate was temporarily reduced to 5% until the end of September. Now we are in October, the rate has risen to 12.5%. At the end of March it will revert to the normal 20% rate, giving businesses time to prepare.
If you would like a review of your business, to assess how it could perform over the next 12 months, with no more government support, then please get in touch with the Optimum team.
If you are moving house, and would like to speak to our specialist property conveyancing team, again please get in touch.
We help businesses, people and families in Cheltenham, Swindon and the surrounding area.