274,720 jobs are at risk of being lost following the end of the furlough scheme, new research has found.
Red Flag Alert, which analyses data and provides insolvency scores, has revealed that 26 per cent of the 741,285 companies making claims under the coronavirus job retention scheme are showing signs of extremely poor financial performance.
This means that 193,721 companies are at risk of going out of business, with 12,600 of these expected to fail within six months of furlough ending, leaving almost 275,000 people unemployed.
An analysis by Red Flag Alert has showed that these struggling companies are experiencing varying degrees of distress, with some at more imminent risk of failure.
In his 2021 Budget Chancellor Rishi Sunak extended the furlough scheme until the end of September.
Dr Nicola Headlam, incoming head of public sector at Red Flag Alert, said 103,404 businesses drawing on the scheme are surviving because they have access to cheap credit and government Covid-19 support.
“A smaller number of businesses, around 5,000, which are registered under the coronavirus job retention scheme are already insolvent or very close to insolvency,” said Dr Headlam.
“Realistically, come the end of September, these companies will be in a position where tens of thousands of jobs have already been lost or will disappear very quickly. Sadly, this is the very thin end of the wedge.
“There’s a much larger proportion of companies claiming furlough, which won’t be able to pay 100 per cent of wages after 30 September.
“This will see a wave of cost cutting measures as many try to repair balance sheets and fight for survival and will inevitably lead to company failures and job losses in the six months after the scheme has finished.
“These are struggling businesses saddled with debt and without the cashflow or prospects of sufficient revenue to sustain employment and operation.”