Surge in demand for specialist finance products expected following end of furlough scheme

Today (30th September) marks the end of the furlough scheme.

According to the latest government data, the Coronavirus Job Retention Scheme — launched in April 2020 — has supported a total of 11.6 million jobs throughout its duration.

Provisional figures show that the number of employments on furlough stood at 1.6 million as of 31st July 2021, 340,000 less than on 30th June when the number of employments on furlough was 1.9 million.

The 10 more detailed industry groups with the highest rates of jobs being put on furlough as of 31st July 2021 were:

  • passenger air transport (51%)
  • travel agency and tour operator activities (46%)
  • photographic activities (35%)
  • creative; arts and entertainment activities (28%)
  • manufacture of wearing apparel (26%)
  • organisation of conventions and trade shows (25%)
  • manufacture of musical instruments (24%)
  • other reservation service and related activities (24%)
  • printing and service activities related to printing (24%)
  • retail sale via stalls and markets (23%)

Specialist finance industry responds

“The scheme has provided a lifeline to SMEs when they most needed it, allowing them to continue operating while preventing the UK from a major unemployment crisis,” stated Chirag Shah, CEO at Nucleus Commercial Finance.

“Although the outlook is more positive than it has been for some time, we’re not over the worst yet. 

“The scheme’s end could leave many SMEs struggling to survive and exacerbate the financial and mental health challenges many business owners have faced over the past 18 months. 

“Moving forward, government and industry must work together to communicate the support available to SMEs and demonstrate how they can help businesses thrive beyond the pandemic. 

“This is where the alternative finance industry has a crucial role to play in providing businesses with the flexible finance they need at speed to help them deliver on their ambitions.”

David Kennedy, chief lending officer at Masthaven, agrees that lenders need to make sure that their customers aren’t left feeling abandoned — and often this means taking proactive action. 

“By breaking down the stigma around financial difficulties and debt and identifying early any customers that might be at risk or struggling financially, lenders can ensure their customers get the support they need and head off potential problems before they worsen,” he said.

“Just as Covid aid schemes are wound down, borrowers and potential borrowers are facing an economy disrupted by supply chain issues and rising inflation. 

“All these factors, combined with rapid house price growth, may mean that borrowers actually require more support than ever over the coming months. 

“Specialist lenders are well prepared to tackle this challenge; we could well see a surge in demand for specialist products as borrowers look for lenders who are able to take a more flexible, pragmatic and personalised approach.”

However, Kevin Mountford, co-founder of savings provider Raisin UK, predicts a tough time for the country, claiming businesses could go back to a “really dark time”.

“We are likely to see many redundancies, just like the spring and summer of 2020. 

“Retail and hospitality might struggle but, ultimately, it's the travel industry that will really see the dent in its sector. 

“With international travel still not at a pre-pandemic level, it’s going to take a while for it to make any considerable progress.

“The Eat Out to Help Out scheme in August 2020 seemed to work but, unfortunately, there will be no Fly Out to Help Out scheme. 

“We also have to look at the people who can't work from home; the pilots, cabin crew, tradesmen, carers, and teachers are all a part of the group of people who have to go out and physically do their job. 

“Where some companies have managed to make even the smallest amount of money back by freeing up office space, it's the ones that are out physically working who are likely be hit the hardest."

Today also marks the end of the stamp duty holiday (SDLT).

From 1st October 2021, the temporary increase to the nil rate band for SDLT will revert back to the standard amount of £125,000 that was in place prior to 8th July 2020, when the stamp duty holiday was introduced. 

Stuart Law, CEO at Assetz Capital, commented: “While the stamp duty holiday undoubtedly fulfilled its goal of helping to prop up the UK property market at the height of the Covid-19 pandemic, the end of the discount is unlikely to spell a drop off in activity.

“In fact, expectations that we will see a brief lull in house price growth as stamp duty returns to its normal levels may actually prove an incentive for those that were unable to make a move prior to the holiday coming to an end. 

“More significantly though, we expect the post-pandemic appetite for larger homes in more suburban and rural areas to continue to drive activity over the longer term.”

Stuart added that more help was needed to support housebuilders to recover following the pandemic and tackle the current challenges they face.

“Streamlined planning processes and increased access to additional funding would help the industry overcome some of the current issues it is facing but, in the short term, they also face additional challenges such as fuel and labour shortages and rising material costs

“Nonetheless, we will continue to do all we can to aid housebuilders to focus on solving the key issue at hand — meeting the nation’s housing needs.”

Leave a comment